Why Africa should matter to Singapore companies
Singapore companies have got to participate in that opportunity. Now that the African Continental Free Trade Area Agreement (AfCFTA) has come into effect, there is good reason for companies to consider Africa as part of their growth strategy.
The agreement provides Singapore enterprises in Africa with the opportunity to diversify their trade and investment mix, and confidently sell their services and products in over 50 countries across Africa – a continent that is home to seven of the world’s 10 fastest growing economies – without paying tariffs on their products multiple times over.
There is also a deeper, more significant shift arising from the AfCFTA. Exporting within Africa used to cost more than exporting overseas, and only 17 per cent of African exports are intra-continental compared with 59 per cent for Asia and 68 per cent for Europe.
The AfCFTA, a flagship project of the African Union, will create the largest free trade area in the world, based on the number of countries it unites under the pact, with a combined GDP value of US$3 trillion.
For Africans and businesses in Africa, the AfCFTA will connect 1.2 billion African consumers in one single market and support the movement of persons, labour, investments and intellectual property.
But it is not just intra-continental trade that will increase. Africa will become even more attractive to investors. Singapore has been among the top 10 investor economies in Africa, measured by foreign direct investment stock, since 2015.
From 2015 to 2019, our investments into Africa rose from US$17 billion to US$20 billion. The attractive market the AfCFTA is striving to create will undoubtedly pique interest from manufacturers and infrastructure developers.
For example, Singapore company Olam International, one of the largest non-oil exporters in Nigeria, would be able to source for competitively priced raw materials from across the continent to support its manufacturing plants for animal feed, dairy products and consumer goods.
Regional integration will spur the development of transport infrastructure for land, sea and air nodes.
Singapore company Tolaram’s Lekki Port Project and its adjacent Lagos Free Zone is set to support the growing demand for commercial operations in Nigeria and the wider West African region.
The AfCFTA’s real and enduring benefit is the opportunity for African nations to develop production specialisation.
By developing clusters of expertise and having supply chains within Africa that feed into each country’s specialisation, African nations will have the ability to scale around different specialisations.
Scale is critical, because economies of scale not only drive costs down, but encourage innovation as suppliers influence each other and compete with one another to address buyers’ specifications to move up the ladder.
With the AfCFTA, companies including those from Singapore can take advantage of greater intra-Africa collaboration.
Regional integration, nonetheless, will take time. Yet, that is not the only way to drive inclusion. Having a single digital economy could be a faster option to circumvent long-standing structural trade barriers.
Digitalisation is rapidly transforming African economies, often leapfrogging technology cycles because there are no legacy systems to hold back transformation.
Digital tools have included millions of people in rural areas, and enabled informal sectors to access financing. Singapore companies are in the thick of the action.
Singapore startup InfoCorp is working with a Kenyan partner to collateralise cows of small holder dairy farmers through an identification and traceability platform. Farmers would be able to unlock the value of their assets and access loans based on the value and health of their cattle.
Another Singapore firm, Guud, which specialises in software solutions and services is developing a Single Custom Territory platform to facilitate a seamless flow of information for faster clearance and cargo movement across borders between East African Community countries.
Thunes, which specialises in cross border payments, collaborated with PayPal and Kenyan telco, Safaricom, to enable fund transfers between PayPal and the telco’s mobile wallet. The collaboration allows Kenyan sellers to access marketplaces through PayPal’s global reach.
Edtech solutions are also increasingly being adopted in Africa. Singapore firm, ACKTEC Technologies, developed a mobile micro-learning app in French for onboarding truck drivers in Cameroon to learn through a computer or smartphone.
Terra.AI is working with CTIC Senegal, a business incubator in Dakar, and their partner Gallium, to launch two AI (artificial intelligence) learning initiatives in West Africa, Chatbot Uni and Forecast University.
Digital solutions aside, Singapore can support the development of a digital foundation to enable interoperable solutions and seamless digital services between Africa and Asia.
The Monetary Authority of Singapore (MAS) has been working with the central banks of Brunei, Cambodia, Ghana and Kenya to develop a common digital infrastructure.
Last year, the Bank of Ghana and MAS started discussions on a Business san Borders open hub which will allow SMEs in both countries to expand into new markets in Africa and Asia. We are similarly negotiating digital trade agreements within Asean.
Courtesy of Enterprise Singapore – Read full article here.