| 00:09 | Hello and welcome I'm Godfrey Mutizwa. It's been a week of talks. It's been a week of negotiations, insights as well as frankly, laughter across the two main streets of Davos, Telstra's and the promenade. |
| 00:25 | But inside the Congress centre, serious discussions have been taking place and we bring you this podcast from Davos, Switzerland. Now Africa has been one of the key conversations around this year's Davos meetings and with me today, I bring you the Secretary General of the African Continental Free Trade Area Secretariat, Mr. Wamkele Mene. Sir, welcome. |
| 00:48 | Thank you. Thank you for having me. |
| 00:49 | With me is a Standard Bank group CEO. Sim Tshabalala. Sim, thank you for your time. |
| 00:55 | Thank you so much. |
| 00:55 | Godfrey, I want to start with your impressions, gentlemen, of the discussions that you were participants in and where you give insights and where you also listened and got insights and ask the question, how was this WEF's focus in terms of Africa for you this year? |
| 01:17 | Well, thank you very much. And I'm very happy to be in this podcast with the CEO. My sense is that over the last three to four years or at least since I've been coming here, Africa has succeeded to present a true narrative of the business and investment climate in Africa. |
| 01:39 | We have succeeded to turn the page and the narrative about the coup d'etat in Burkina Faso, civil war in Sudan. Now investors, at least the investors that I've been talking to, are focusing on where are the investment opportunities. |
| 01:59 | And second, they are identifying barriers to investment, barriers to new market access. And this is exactly the dialogue that we should be having with investors when we come here. Not only our own investors, African investors, but but also investors from outside of the continent. |
| 02:21 | And so we have been very encouraged by the the interest in investing in Africa. Obviously it is driven in part by the fact that the continent of Africa is the second fastest growing investment destination after Asia in the world. It's also driven in part by the fact that the economy of Africa is set to grow at about 4.3, 4.5% in 2025. |
| 02:55 | So the indices are positive. The commitments of governments is there, I believe for many, many governments, the fiscal discipline is there. The macroeconomic stability is there, as well as the the positive outcomes that we saw from many, many countries undertaking painful structural reforms. |
| 03:19 | So I think in general the the the picture is positive, but of course we have to keep making the argument. |
| 03:27 | Absolutely. I'm curious, what questions were you being asked? |
| 03:31 | Well, I was asked actually, what kind of a continental regulatory framework are we establishing for investing in critical minerals? I was asked about an issue that is close to my heart as both of you know, and that is payments. How do we ensure that there's a seamless payments and banking system on the continent? |
| 03:58 | And I was asked about countries that, that have undergone debt distress, how does that impact on their investment on them as an investment destination. The country that I live in, Ghana, when underwent a very, very severe debt distress crisis which is now abating somewhat. |
| 04:21 | So these are the questions that we are being asked. And then of course the other present and relevant question of policy certainty. And I turn the question around. |
| 04:33 | I say actually we do have the policy certainty, but from January 20th this year, there will be policy uncertainty elsewhere. So that question should no longer be posed to us as Africans, it should be posed elsewhere. |
| 04:49 | Sim, your impressions, your takeaways, You, I know, have certainly been in a number of sessions. And I also certainly know that you have been talking, you have been listening. What did you make of this year's WEF? |
| 05:00 | Yes indeed, got free. First of all, the fact that I'm sitting next to the SG who I might just mention went to the same university as I went to. |
| 05:11 | Oh, there we go. Rhodes University. |
| 05:12 | We come from the same country, went to the same university and we studied the same thing in the same law school the same. |
| 05:22 | All our habits are the same. All our bad habits are the same. But on a serious note. |
| 05:26 | So when I woke up this morning I walked down the hill and up the hill to my first meeting, which was a session that was talking about the direction the world is taking on the transition. And the debate was about OK, given where the world is now, given where Europe is, given where the US is, Africa, the Far East and indeed the Middle East. |
| 05:53 | Quo vadis, the commitment to the Paris Agreement, 1.5° is that even achievable anymore? And what do we do? I then walked as the snow was falling to my next session, which was outside the Congress Centre and it was at a session hosted by Yara and the discussion there was about food security. |
| 06:18 | What does Africa do to secure its food security in an environment where many countries ought to be food baskets, yet they either import a lot of the food that they need or they export the food, whether raw materials as it were, to one country, say cocoa. It gets value added and then it comes back to us at multiples of the cost of inputs. Fascinating discussion. |
| 06:47 | I then walked to the next session, which was the P20 session and had to miss a session that I would have loved to have been at that SG was looking at right here at Africa Collective. And either that meeting was the P20 meeting where business was talking about South Africa's role, the African continent's role, at this time that the presidents of the of the G20 is under South Africa under the theme of solidarity. Equity or quality and sustainability. |
| 07:23 | Fascinating discussion, talking about how to take that forward and indeed how to engage the world on what we need for our purposes. |
| 07:35 | I then went to my next meeting, which was with a large, one of the world's largest oil companies, and we spoke to them about their route to net zero. Their projects on the African continent, our contribution there to the infrastructure needed, the funding needed and therefore what policy environment is needed. |
| 08:01 | And then- |
| 08:02 | You've been busy. |
| 08:03 | I've been busy and then I came here and we're having this discussion and we'll no doubt, I think, be teasing out issues around trade and what those mean for the African continent. |
| 08:12 | Absolutely. And I'm also curious, I want to ask you the same question I asked the SG, the questions that you have been getting from people who are looking at Africa and thinking maybe it's a place for us to be able to go to. But I also want to add the message that you have been sending, that you wanted to send when you came to Davos. |
| 08:29 | Let me start where you ended. |
| 08:31 | The message is as follows. |
| 08:33 | Africa has got the world's best demographics. It is a large economy, over $3 trillion. It is growing at 4% between now and 2030. From 2030 onwards, it will be growing faster than Asia. African people will be coming healthier, wealthier, more productive. |
| 08:57 | And therefore as the world thinks about where to go and as the world figures out what to do with the green transition, the need for the minerals necessary for that transition, they have nowhere else to look but to the African continent. By the same token, we have to get our act together as Africans. |
| 09:19 | We have to create the space for these investments to happen. There's a role to be played by the official sector and the private sector in PPP et cetera, and we'll come back to that a bit later. |
| 09:29 | The questions being asked were: is the growth in South Africa durable? Was the GNU a miracle? We say to them, no, the GNU was formed within 30 days of the elections being completed. There are countries not far from the one we're at now that took 550 days to put their government in place. |
| 09:50 | Ours in place and functioning, and all of those ministers are with us today. Flying the South African flag. |
| 09:58 | The next one is: will Africa be able to beneficiate the minerals that they produce? Will Africa be able to put in place the legal and regulatory environment to facilitate the movement of goods, people, capital, ideas, data and so forth? Will Africa seize the moment? Will this actually be the African century? |
| 10:26 | What will Africa contribute to artificial intelligence and where we are going on artificial intelligence? |
| 10:33 | What contribution will Africa make to quantum computing as well because it affects us too? And will Africa have the human capital to take advantage of all of those opportunities? |
| 10:43 | Absolutely. So I say it in a session where Strive Masiyiwa, who I'm sure all of you know, and he was being told that, you know, these things are expensive. The quantum computers that you're talking about and also the powerful computers that are being built. |
| 10:58 | And someone said, you know, these H100s are expensive and you know, we will need to see how we can get them to Africa, and Strives, and we want them now and we want them yesterday. You guys are late, so.... |
| 11:09 | Oh no! You want them, but it's in your best interest to have them in Africa because production in Africa produces less CO2 emissions, it's cheaper to produce in Africa, and the world needs their diminishing CO2 emissions and cheaper production. |
| 11:24 | I was being schooled, I can tell you that. But SG, I also want to know what you were saying about the AfCFTA because this is our key baby, if I may put it that way, to what many are saying will be economic prosperity. And I wonder, your positioning when you were talking to all these people, what you were saying to them because all of us know the work that you have put in and the work that you continue to put in. |
| 11:51 | Well, the big question is, is it working? |
| 11:54 | Is it working? |
| 11:55 | Is it functional? Is trade happening? Do governments take this seriously? This is the big question that we are being asked. And the answer is of course, yes, it is functioning. Trade is is happening. The governments are encouraging their private sector to trade using the rules, the preferential rules. |
| 12:20 | I actually wanted to ask you that question. |
| 12:22 | Of the trade agreement and from a legal standpoint we, the evidence is there because their certificates of origin are being issued. |
| 12:33 | The big market that we are trying to create, the point the CEO is making of 1.4 billion people is a market that is anchored at law to create, you know, rules that will enable investors to have confidence to invest and that will enable where they are disputes, disputes can be resolved according to the law that has been agreed to. |
| 13:00 | So the legal architecture certainly, in my view, is sound and has been agreed to, is a very, very good basis for us to continue to grow Africa's economy. |
| 13:12 | And then of course, the other big question is what are you going to do about all of these challenges? Infrastructure deficit is a number one challenge. |
| 13:24 | The cost of transport and logistics. The reliability of energy security, climate change and trade, climate change and industrial development. All of these questions are related to a realisation that okay, fine, we doubted that you Africans were serious about this, but how are you going to solve all of these related challenges? |
| 13:52 | And, and then climate change, the point that CEO was making, we have what we refer to as the Africa Green industrialisation initiative, right, which is an initiative that President Ruto is championing on enabling a green transition in Africa without compromising on Africa's industrial development. |
| 14:17 | And he has asked me to chair the the working group that takes this forward to the heads of states. We are now in the process of identifying bankable projects that will drive Africa's industrialisation, green industrialisation, at the same time creating opportunities for investment. |
| 14:40 | So, the evidence is there that not only is the legal architecture at place, but also we recognise that we must respond to the challenges of the time as regards the cost of transport and logistics and infrastructure. That's why between Africa Finance Corporation, AfDB and Afreximbank, there's a balance sheet to combined balance sheet of about maybe $120, $115 billion. |
| 15:14 | So, we challenge them all the time to deploy capital to alleviate the infrastructure deficit. And we see that happening, obviously not as as fast as we would like to see it happening, but we do see large amounts of capital being deployed towards infrastructure development. |
| 15:36 | So, I think that a combination of the rules that create a single market for investment and trade, as well as the tools that are required and the levers that are required for us to deliver on this market of 1.4 billion people. |
| 15:54 | So, that capital that you talk about that's available now to tackle our infrastructure challenge, of course excludes the private banks. |
| 16:04 | Yes, this is DFIs, this is a balance combined balance sheet of the development finance institutions. Private equity, commercial banks also have an opportunity to to invest. |
| 16:16 | And one of the things that we are discussing with our development finance institutions on the continent is how do we, how do we work with the private sector, commercial banks in particular, private equity to make sure that through risk mitigation and spreading of risk that that they can invest more. Somebody has to take the first knock or punch on the face. That's what the the DFI balance sheet is there for. |
| 16:49 | To, for risk mitigation. And and so I think that we are in a very, very positive track forward, provided we continue to strengthen the partnership between private and public sector, DFIs in particular, on this, particularly on this issue of investing in Africa's infrastructure. |
| 17:14 | Absolutely. So come in Sim, because I want to ask the question whether you are seeing the initiatives that are necessary for the private sector to be able to come into play, especially on this issue around infrastructure. |
| 17:32 | Godfrey, yes. There are just so many examples of public private partnerships between DFIs, the private sector and governments and they show us the way. And there are many examples and if I could use a couple that illustrate the point and then reinforce what the SG is saying. Think about the Lobito corridor. |
| 17:59 | Yes. |
| 18:00 | You need a port in Lobito so that you can have access to the copper and the cobalt that is in the copper belt, and you need to get it to the to the port. To get it to the port you need road, rail and you need to fix the port. |
| 18:15 | For that purpose. You are in partnership with the USDFI, the DBSA and commercial lenders. The AfDB's also involved. |
| 18:27 | Africa Finance Corporation. |
| 18:28 | Africa Finance Corporation. And everybody is playing their part in the senior lending, in the mezzanine and in the equity, and everybody is acting in terms of their mandate. It's a fantastic example. Then you've got South Africa, one of the best, if not the best renewable energy power producer, independent power producer procurement programmes. It is a the gold standard. |
| 18:54 | In the world. |
| 18:54 | I'm a proud South African, but I can say with confidence it is the gold standard. |
| 18:57 | I'm a reporter and I've been reporting it's one of the best in the world. |
| 19:02 | It is fantastic. The legal and regulatory framework is clear, the contracting is clear, the off-take is clear, and as a consequence we've got players like Scatec, which is a Norwegian player, which interestingly is also a public private partnership. |
| 19:18 | You got that the Norwegian DFI as a shareholder and then you got private shareholders in that business and they're providing the project and the project sponsorship and support of that project. So there are many of these examples, but let me just say this and I'm lobbying the SG here when I say this. |
| 19:40 | Please do. Please do. |
| 19:41 | There's no free lunch. Our investment bankers calculate that we will need about $3.4 trillion in money to build all of this infrastructure ranging from the energy right across water and sanitation, roads, rail, et cetera. African pension funds, assets under management and assets and, assets being managed by asset managers are about $2.5 trillion. There isn't enough funding on the continent and the DFIs balance sheets are too small for this purpose. |
| 20:16 | And the banks also actually don't have all the firepower necessary for this. However, the world has got $145 trillion in assets being managed by asset managers and some of that money cannot find a home, cannot find projects. |
| 20:34 | One of the ways, there are many levers to pull, but one of those levers which is starting to be pulled by various organisations is Sustainable Development disclosure by businesses so that investors with an interest in sustainable finance and projects and businesses that meet that criteria can find one another. |
| 20:58 | That's one big contribution to these efforts. But in two important ones are, which is part of what the South African team is going to be driving for is, there has to be a frank discussion about the cost of capital for the African continent to deal with everything, including the Africa perception risk premium, the role of the various players, including the role of government. |
| 21:27 | What must government do? Well, frankly, you need budget transparency. The authorities need to be clear about their fiscal positions, tell investors clearly the fiscal outcomes in a way, again, as a South African, using South Africa as an example. As you know, South Africa is ranked third in the world for budget transparency. |
| 21:46 | I've made a mistake. Third. Globally. Better than the United States, the United Kingdom, Sweden, Switzerland. Et cetera. |
| 21:53 | I remember reading that story. |
| 21:55 | And so we need, we need that level so that we can close this gap, this funding gap and this perception premium. |
| 22:04 | The opportunities, Godfrey, as you can tell from my posture and my tone of vast and exciting. But there's a lot to be done between the official sector and the private sector. |
| 22:14 | And one last point here, again I'm lobbying, and that is the multilateral agencies and the DFIs need to rethink their mandates. |
| 22:24 | Right. |
| 22:25 | And the summary here is that they ought not to have mandates that land up having them competing with commercial banks, and that they ought to be providing the mezzanine, the equity, the risk funding in a way that a commercial bank will not. Because the mandate of a commercial bank, Godfrey, is you've given us your deposit. |
| 22:46 | You don't want me to tell you that I've taken a risk on a major project and therefore I cannot pay your child's deposit for university. You want that money? |
| 22:56 | 100 percent. |
| 22:57 | And I unashamedly say this, it's not the banks job to take risk with depositors' money. I need to be absolutely certain that I'll pay your money, your payment when you're buying coffee. |
| 23:10 | Absolutely. |
| 23:10 | Et cetera. I and I need. They need to have that. They need to have that frank conversation. |
| 23:14 | Absolutely. |
| 23:15 | No, I think, I think, CEO. Look, we had this discussion in September last year when the chairman of the Dangote Group arranged the retreat in Kigali. |
| 23:29 | Fifty people in the room, both public and private sector. And this issue was at the very fore about the role of African development finance institutions. In particular Africa Finance Corporation, Afreximbank. Because the shareholding of AFDB is structured in a way that we have 40% that is what we refer to as a non-resident— |
| 23:58 | Non-regional. |
| 23:59 | Non-regional rather. Thank you. So the the the role of our own development finance institutions is absolutely key. And in the room, Standard Bank was represented by the chairperson. |
| 24:15 | The best chairperson in the, in the global South. |
| 24:18 | Indeed! |
| 24:18 | If not the world. |
| 24:22 | So in the room, we confronted this issue about what exactly is the role of our development finance institutions, their mandate. If you take for example, we've talked now about investing in infrastructure. But take the cost of trade finance. |
| 24:43 | You, we, we've got to be able to go to a Standard Bank, Ecobank, Equity Bank, and say to them, if we come with a guarantor, let's work together to see how we can reduce the cost. So that we reduce the risk factor on the commercial bank. You as Orama or Additional or Samaila, you take the lion's share of the risk and you can spread it amongst yourselves. |
| 25:15 | Are you winning? |
| 25:16 | I think we're getting there. In fact, I'm going to collect my $2 billion from the CEO. The very first meeting we had, he challenged me. He said if you can get a a very, very strong mitigation, risk mitigation for me, I'll give you $2 billion. So that is my motivation to get them so in this— |
| 25:41 | I hope you get it. |
| 25:42 | I'm working hard. |
| 25:43 | Subject to credit committee approval. |
| 25:47 | Disclosure. |
| 25:48 | We will capture those people in that credit committee. So in the room in Kigali during this retreat, I was the youngest and the poorest, by the way. There was a lot of capital. We don't have any capital, but there was—and all of them were there. So, DFIs. We challenged them, including the commercial banks, Access Bank, UBA and Equity Bank. We challenged them that we need to see more much, much stronger interventions to support our, our commercial banks. |
| 26:29 | So we're running out of time. We'll never have enough time anyway. But another time perhaps we can explore some of the other things. |
| 26:34 | But I wanted to ask you whether you shared with the delegates as WEF, the business people, two of my really pet projects from an AfCFTA perspective. The guided country trade initiative and what the responses was to that and also the trading companies initiative and what kind of responses you got in terms of that. |
| 26:57 | We did, actually. We pointed to how the private sector has got to take charge of trade on the continent. And this is where the issue of trade finance becomes important. So we've established all of these trading companies that are essentially aggregators in each country, each region. |
| 27:17 | So for example, in Kenya, you have an AfCFTA trading company that will aggregate all of the goods to be exported to Nigeria, because the smallholder farmer doesn't have the capacity, and should not actually be exporting or, you know, navigating the complexities. And, and we have said to our development finance institutions, Afreximbank in particular, make a facility available that will support these trading companies. And the reason we established these trading companies, is from the experience of Singapore, Malaysia and South Korea. |
| 27:57 | So, all of these large corporations started as aggregating companies that we see in South Korea. |
| 28:05 | Fantastic. |
| 28:06 | So this is an example of the involvement of the private sector. |
| 28:11 | Absolutely. And yeah, it is always saying we're running out of time. So I need to wrap up guys with your thoughts and your key takeaways as we look into 2025 and ask the question: as you come away from Davos, Sim, your priorities from a Standard Bank perspective. |
| 28:33 | Godfrey, just to pick up on the conversation we've been having here, it's firstly, we have very good reasons as Africans to be rationally optimistic and to use Klaus Schwab's words, constructively optimistic. We've got lots of data points which the SG and I have just spoken about. It actually is Africa's time and we should stand up and proudly say so and take charge of this narrative |
| 29:01 | Firstly. Secondly, we, part of the narrative is as I've said to you, we know from the Smithsonian Institution's National Museum of Natural History that Africans have been trading for 320,000 years. Homo sapiens in East Africa and Southern Africa have been trading for that long. |
| 29:23 | There is no reason why we shouldn't continue that tradition and in fact we've been doing so. If you just think about what our leaders have said since after the Second World War and the actions that they've taken from that period onwards, moving in the direction of more trade on the African continent. |
| 29:40 | Importantly, in that context, it's important to recognise that the statistics we quote about the size of African trade are actually misleading because there's lots of informal trade that— |
| 29:51 | Is taking place. |
| 29:52 | Particularly along the borders. |
| 29:53 | Particularly along the borders. And so part of what we will be doing at Standard Bank is driving the narrative and driving the activity that facilitates more of this trade to happen. It will be making the case for the building of the infrastructure to build that ability to trade more extensively on the African continent. We'll be putting our shoulders to the wheel, behind the SG to get the AfCFTA accelerated. And lastly, we will be making sure that South Africa takes its rightful place, like our constitution says, in the family of nations and so will the African continent. |
| 30:33 | Constructively optimistic. SG? |
| 30:36 | Well, the priority for us will be intensification of implementation of the AfCFTA. I think that there are very strong headwinds coming as of given what happened in in the US. I think that we will see a great deal of macroeconomic instability. Not as a result of mismanagement of the macroeconomy, but because of externalities. |
| 31:07 | Absolutely. |
| 31:08 | I think that the policy uncertainty environment that will be coming out of the US will have an impact on us. So we've got to strengthen our resilience. |
| 31:18 | So those ministers of finance who have succeeded in having macroeconomic stability, fiscal discipline, as I said earlier, you know, benefited from structural reforms, will have to, you know, tighten their belts and buckle up. |
| 31:35 | From our point of view, we see trade policy as a as a tool, as an instrument to enhance Africa's overall macroeconomic resilience. So that's that's our twin priority. |
| 31:47 | Absolutely. And we must work hard to make sure that those priorities are realised. I saw a number today from the World Economic Forum saying the uncertainty that's been created by the threats of tariffs, et cetera, is going to cost the world $15.7 trillion if fully enacted i.e. worst case scenarios, not a small number. |
| 32:07 | And so we need to buckle up, gentlemen. Thank you for your time. |
| 32:10 | Thank you very much. |
| 32:12 | Thank you. You have been watching the Standard Bank CIB podcast and this time, as you saw, we bring it to you from Davos, Switzerland, where they were all talking about key themes that are going to be driving African economic growth. And I'm hoping that you have been able to get some key takeaways that you use in your own daily lives. Until next time, thank you for watching and goodbye. |