Building Africa

2013-03-24 10:00

Africa is on the cusp of global exposure and Brics will help us get there, writes Roger Jardine

Africa is on the move. Despite a sluggish global economy, according to the International Monetary Fund (IMF) last year, Sub-Saharan Africa grew at 5.3% compared to a world average of 3.3%.

This was no flash in the pan.

The Economist found that between 2000 and 2010, 60% of the fastest growing economies in the world were from sub-Saharan Africa and it is forecast that between 2010 and 2015, Africa will grab 70%.

South African companies, like those in much of the rest of the world, were initially slow to spot African opportunities.

But we have now made huge strides in investing in Africa and have continental champions in many areas, from banking and mining to telecoms and consumer goods.

Why has the continent of erstwhile gloom now taken on the lustre of infinite possibility?

Africa is urbanising fast; has a young, productive population; is increasingly stable and democratic; and is rapidly reshaping its engagement with the world.

Economic growth is further fuelled by a resources boom as emerging economic giants – most conspicuously China – have developed a sustained hunger for African resources.

Joining Brics was a diplomatic triumph for South Africa.

According to Standard Bank, a decade ago, Bric economies accounted for just 5% of South Africa’s total trade, but by last year, this had risen to 19%.

China is now our largest single trading partner.

For us, a key measure of our success as a Brics member will be how effective South African companies are at accessing other markets in the grouping.

South Africa has made it very clear that we are not going to represent Africa in a strict sense of the word, but will rather promote Africa’s agenda.

The theme of the Durban summit – Brics and Africa: Partnership for Development, Integration and Industrialisation – captures these aspirations.

Despite being relatively underexplored, it is estimated that Africa has about 30% of the planet’s mineral reserves, including 40% of its gold, 60% of its cobalt, and 90% of its platinum group metals.

For Aveng Mining, the mining arm of the Aveng Group, 70% of our current surface mining business is now outside of South Africa in eight African countries, where we are helping miners meet the demand for minerals like copper, nickel and gold.

Likewise, no one who has travelled up the Angolan, Nigerian, or northern Mozambican coasts will be surprised to hear that Africa is becoming a player in global energy markets.

Securing long-term energy supplies is driving much of the Brics countries’ interest in Africa.

But having vast mineral reserves and a young, productive population will not guarantee sustained growth.

Unless, of course, Africa can attract investment and diversify its economy.

Infrastructure will unlock both because of its multiplier effect.

The South African Federation of Civil Engineering Contractors estimates that every R1 invested in infrastructure creates between R2 and R3 worth of value in the economy and enables employment creation.

A recent Business Monitor International survey of investors in Africa identified the inadequacy of physical infrastructure, particularly in the power and transport sectors, as one of the biggest constraints to economic development.

Less than 40% of the continent’s population has access to electricity and only 65% can access clean water.

Inadequate infrastructure undermines human and economic development.

The need is huge.

The African Development Bank estimates that financing Africa’s infrastructure deficit could cost $93 billion annually until 2020.

For Africa to capitalise on the growth opportunities offered by the Brics, its trade infrastructure needs a boost.

But we must not replicate colonial patterns of trade infrastructure that connected African countries to European colonial markets.

We need cross-border infrastructure to connect countries and regions with each other to facilitate trade.

Today, only about 10% of African trade is with other African countries.

Africa must trade with Africa first.

Strengthening intra-African infrastructure will also strengthen our ability to trade with each other, with other Bric countries, as well as with the rest of the world.

The commitment by 26 African countries to create a free-trade area in east, central and southern Africa by next year will go some way to remove tariff and other barriers that constrain intra-African trade. But policy alone is not enough.

Infrastructure will make it happen.

Who will drive the massive investment in roads, rail, telecoms, power, ports and water infrastructure that is needed to extract and export resources, to support rapid urbanisation and to drive industrialisation?

The planned Brics development bank and other development finance institutions offer a potential source of financing for major cross-border infrastructure projects such as the much anticipated north-south road and rail corridor project to connect eight African countries.

Some Brics companies or even state institutions have been using their own balance sheets to finance major infrastructure.

Chinese companies are now famous for their “infrastructure for resources” deals.

The balance sheets, people, and sheer scale of resources of companies from Brics countries can be daunting.

As South African companies, we will have to raise our game and leverage off our competitive advantage – in particular a reputation for high-quality, solid experience in doing business on the continent, and building sustainable relations with local communities.

Naturally, we will compete in areas and we will collaborate or even be clients of Bric companies in others. For example, Aveng will soon be working for a major Brazilian resources giant in northern Mozambique.

Closer to home, we are constructing a deep shaft for the Chinese-owned Wesizwe platinum mine.

These are just some examples of how we are working with our Bric counterparts to build infrastructure and support economic development in Africa.

If South Africa Inc is to thrive, business and government need to show a greater sense of collaborative urgency if we are to build the infrastructure to support our own and the region’s growth. We must get to work.

» Jardine is the chief executive of Aveng Group

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