Africa Focus

Sassda Market Intelligence Specialist Lesley Squires recently attended The Africa 2022 Conference hosted by Africa house. Here she reports on the information and insights shared at the event.

The African continent has massive potential for growth and expansion. With its fast population growth that creates excellent opportunities in the  global business environment, businesses need to strive for improved innovation and greater investment to meet a shortfall in the demand for goods and services.

In addition to this, more out of the box thinking is necessary for job creation, poverty reduction and to close the gaps in infrastructure. It is undeniable that the continent has incredible potential for growth, and that businesses can play an important transformative role that will contribute to addressing some of Africa’s biggest challenges.

CHANGING DYNAMICS

South Africa is seen as the most productive and advanced economy in Africa. As a result, most international companies looking to enter the Sub- Saharan marketplace consider South Africa as a logical option. Although the South African economy has enjoyed relative macroeconomic stability coupled with a stronger foothold, South Africa’s share of African trade is shrinking, and its global share has dropped from 8% to 6% over the past decade. There are a number of factors contributing to this decline.

• South Africa’s reach and integration is limited due to very small pockets of influence in East and West Africa, and even less in North Africa;
• South Africa is only the 11th fastest growing exporter to Africa of the 25 largest export countries;
• In Sub-Saharan Africa over the last decade, South Africa ranked 17th in exports. This represents a drop in exports of 14% in dollar terms over that period and has resulted in it lagging behind global competitors such as Russia, Turkey, United Arab Emirates, Hong Kong, China, and Kenya.
• Businesses need a more sustainable and flexible approach to the region. The answer to this could lie in the creation of special economic zones.
  South Africa has already established the Industrial Development Zone (IDZ) programme in an attempt to reposition the country in the world economy. The market at large also expects major improvement as a result of the formation of the African Free Trade Area agreement along with other focused anchor projects.

GOVERNMENT PERSPECTIVE

There have been key developments in various areas between South Africa and the rest of Africa. South Africa and Kenya’s longstanding strategic partnership and bilateral relations specifically in the areas of trade and security has been further enhanced by a new partnership between the  countries and Wines of South Africa to distribute wine and for the supply of capital goods. Zambia has a deficit in capital goods in its copper mining ector. The country also needs assistance with the upgrading of its railway infrastructure. There are ongoing negotiations regarding agri-processing and food and beverage equipment. The dtic also noted that trade discussions between South Africa and Senegal are ongoing. Egypt is experiencing an overall shortage of steel, and has looked to South Africa for assistance in its automotive, textile and pharmaceutical sectors.

ONES TO WATCH IN 2022

Rumour has it that South Africa has a new deal in power infrastructure that’s set to kick in, while the rest of the continent has some exciting developments, both politically and through economic transformation and reform. Angola, Zambia and Tanzania are looking at new reforms in the political sphere. A marked effort is being made to ramp up mining, power and general infrastructure in DRC while Mozambique is focused on the resumption of onshore LNG projects. Namibia is looking forward to the possibility of new oil, gas and green hydrogen frontiers. The Horn of Africa still faces tough times ahead with unresolved conflict in Ethiopia. Cameroon is the gateway of Central Africa but opportunities are emerging in other countries as well.

KEY PROJECTS MOZAMBIQUE

MOZAMBIQUE

Mozambique has a variety of key projects in the pipeline. The Coral-Sul FLNG which boasts an annual capacity of 3.4 million tonnes of LNG has arrived in Mozambique. Production is expected to begin in the second half of 2022 and will contribute tremendously to increasing gas availability in the country. This year will also see the return of the Matola LNG site, a project that is set to meet the energy demands of both Mozambique and South Africa. The industry also foresees the final investment decision regarding Matola’s storage and regasification unit.

NAMIBIA
The recent and significant Graaf 1 discovery in the Orange Basin, offshore Namibia, with its oil and gas reserves is a marked success for the country. this is excellent news for both South Africa and Namibia who share the same geological sedimentary basin. The Orange Basin has emerged as a major hydrocarbon province, and the already advanced exploration on the Venus site is set to continue into 2022. Both the Graaf and Venus wells will have an incredible impact in terms of cost-saving and supply for Namibia.

OTHER IMPORTANT KEYNOTES

Invictus Energy is expected to drill exploration wells in Zimbabwe in the second quarter of 2022. While this is seemingly good news for Zimbabwe, a gas discovery could potentially present major implications for Zambia. Angola expects production to stabilise around 1 - 1.2m BPD following the  injection of approximately $90 million for deferred Financial Investment Decisions in 2020. The industry also expects major developments as Uganda’s FID is taken on upstream, and the EACOP pipeline. As exploration is set to begin, we may just see the first East African development of oil outside of Sudan. Tanzania is still in negotiations with Shell and Equinor, and if this turns out to be a lower CO2 emission project, its proximity to the MLNG site could imply future coastal ribbon development. Tullow Oil has submitted a revised FDP in December 2021 for the Lokichar-Lamu Oil Pipeline in Kenya. In addition to this, drilling of the ENI Mlima-1 exploration well is in progress. Although the GDP slump has injured most African economies, many are bouncing back in 2022. Countries like Rwanda and Angola are already seeing improved risk ratings, and it is clear that debt restructuring is critical to get the content up to speed. The COVID-19 pandemic has reinforced the need for more intense intra-African trade and development that goes far beyond medical supplies to a more intricate focus on living conditions and the restructuring of markets. As populations become more modernised, there is a greater demand for reform and transformation in urban areas. This can be promoted by a regional increase in the manufacturing of building materials, FMCG products, and ramped up efforts in the areas of social services and infrastructure. However, a marked success will only be possible with the full support of the African Continental Free Trade Area pact.