South Africa’s President Cyril Ramaphosa said at a joint news conference with Xi on Tuesday that China had committed to invest $14.7 billion in the South African economy, but neither leader mentioned the $10 billion complex.

Ramaphosa is on a mission to kick-start economic growth after a decade of stagnation and is targeting $100 billion in new investment over five years.

The complex, which is still in the planning stage and envisages building a stainless steel plant, a ferrochrome plant and a silicomanganese plant, is a much-needed vote of confidence in the sputtering South African economy.

Trade and Industry Minister Rob Davies said on Tuesday that China was considering a metallurgical project in a special economic zone (SEZ), but he did not reveal the scale of the project or timeframe.

The executive involved in the project, who did not wish to be named because he was not authorised to speak to the media, said memoranda on the complex were signed before Xi and Ramaphosa gave news conference on Tuesday.

Richard Zitha, a project executive at the Musina-Makhado SEZ where the complex will be based, said the project was being led by Chinese state-owned companies, but he declined to name them.

He said the Chinese investors would look for Black Economic Empowerment partners to comply with South African rules designed to address racial disparities more than two decades after the end of apartheid.

The investors were open to investors from other countries joining at a later stage, he said.

“The investors have been in South Africa for around a week and have visited mines to look for inputs for the project,” Zitha said.

The Musina-Makhado SEZ is in Limpopo province close to South Africa’s borders with Mozambique, Zimbabwe and Botswana.

The SEZ plans to house plants with a capacity of 3 million tonnes per annum of stainless steel, 3 million tonnes per annum of ferrochrome and 500,000 tonnes per annum of silicomanganese. Those capacity targets are subject to change and will be finalised by the end of the year, the executive said.

A coal-fired power plant, coking plant and coal washery will be built alongside the metallurgical plants, a presentation prepared for investors showed.

Some of the steel output for the complex has been earmarked for export to China, while other products would be sold to countries in southern Africa, the executive said.

South Africa is already a major exporter of metal alloys to China.

Investors are hoping to receive the necessary environmental approvals by the end of March and would then start construction, Zitha said.

First, trade is mostly good. Economists and policy makers have known for a long time that trade is generally good for economies and more trade typically means faster growth. Or to put it the other way, no trade typically means economic stagnation. In Africa however, trade seems to be more difficult compared to other parts of the world and seems to not be as pronounced. For instance, according to the Trade Law Centre (TRALAC) for Southern Africa, intra Africa trade, that is trade within African countries, stood at between 10 to 12 percent of total trade in 2013. For context, comparable figures were 40% in North America and roughly 60% in Western Europe. Tariffs faced by African countries exporting to Africa were higher compared to exporting to the rest of the world. Non-tariff barriers were estimated to be twice as large. In short, for most African countries, it is easier to trade with the rest of the world than to trade with fellow African countries.

It is this disfunction that gave birth to the idea of the AfCFTA. The basic idea of the AfCFTA is to facilitate trade within Africa by agreeing to remove tariffs within Africa for a large variety of goods. But it does not end there. It also includes measures to remove non-tariff barriers, to promote cooperation between customs authorities on standards, regulations, and facilitation to make it easier for goods to flow across Africa. It includes dispute resolution mechanisms, charters on the free movement of people, mutual recognition of standards, licensing, and certifications, and so on. All in all, it is an agreement to make trade easier within Africa.

The March agreement was not necessarily about instantly kicking of free trade but about establishing the AfCFTA from a legal standpoint. Individual countries still need to ratify the agreement and negotiations still need to be held on various issues. It was however a significant step forward for an idea that many had worked on for over a decade. A step with Nigeria initially led but was unfortunately absent.

So, should Nigeria have signed the agreement? Well trade is mostly good. Mostly, but not always and not for everyone. We know that overall trade is good, but sometimes the benefits are not evenly distributed. For instance, if you have a manufacturing sector that exists solely on the back of government protection from international competition, and as a result has incorporated relatively higher cost and less efficient techniques, then trade will not be good for those sectors. The competition from freer trade will wipe out those sectors. If that sounds like the Nigerian manufacturing sector then you may not be too wrong. Although in truth it is a small but vocal fraction of Nigerian industry. The ones who are well connected and who use their political influence to block competition, sell sometimes subpar products, and make mega profits, will have to become competitive or die. They stand to lose from Nigeria joining the AfCFTA. Although I’m sure most Nigerians who will get access to cheaper and maybe better quality products won’t be complaining.

On the other hand, the serious manufacturers who focus on efficiency and competitiveness will gain a tremendous opportunity to expand into the African market. I know we like to talk about how large Nigeria’s economy is, but Africa’s economy excluding Nigeria is much bigger. Nigeria is only roughly 12 percent of Africa’s economy and the remaining 88 percent means hundreds of millions of potential customers for Nigerian businesses. Why would we not want our businesses to gain access to that market?

The potential gains from Nigeria joining the AfCFTA far outweigh the costs and it would be another nail in our slow development coffin if we do not sign up. Do I think we will? Well it’s difficult to imagine a government whose economic philosophy is self-sufficiency opting to join a free trade area. But I will be happy to be proven wrong.

Nonso Obikili is an economist currently roaming somewhere between Nigeria and South Africa. The opinions expressed in this article are the author’s and do not reflect the views of his employers.

]]> http://bartonheyman.com/article-update-on-free-trade-three-stories/ Mon, 26 Mar 2018 09:29:02 +0000 http://bartonheyman.com/?p=5008 […]]]>

Permit me to tell you three stories.
During the Napoleonic wars, it became very difficult for the British to import grain from Europe. This led to the British looking inward and expanding wheat farming in their own country. As the wealth of the landowners grew, they sought to protect their profits. These fears seemed justified when shortly after the Battle of Waterloo, the price of wheat fell from 126 shillings for 8 bushels to 65 shillings as foreign wheat began to make its way back to Britain. To protect local farmers, parliament passed the first Corn Law, which restricted the import of foreign wheat. The effect was almost immediate as the prices of bread, the main product of wheat, skyrocketed. This had a knock on effect as higher food prices meant that workers began to demand higher wages putting pressure on manufacturers, who put pressure on parliament to repeal the Corn Laws. However, the landowner dominated parliament held firm until a recession in 1839. By 1842, recession had become depression. By 1845, the Anti-Corn Law League was the most organised political group in Britain, and they were pushing for free trade. The failure of the Irish potato harvest in 1845, and the mass starvation that followed, forced the government of Sir Robert Peel to reconsider the Corn Laws. In January 1846, the duty on oats, barley and wheat were removed, and there has been no mass starvation in the UK since then.

The second story is from China.
In 1958, China’s leader, Mao Tse-tung launched what he called the Great Leap Forward aimed at rapidly transforming China from an agrarian economy to an industrial society. The main idea behind the Great Leap was to industrialise China by avoiding the import of machinery and instead, making use of the massive supply of cheap labour. Mao discarded the advice of technocrats such as Zhu Enlai and Deng Xiaping, and chose to use the collectivisation methods favoured by Joe Stalin in the Soviet Union two decades earlier. He believed that by closing up China to the outside world, within fifteen years, China’s industrial output would surpass that of the UK. It did not. Without the skills from other places, Chinese society rapidly fell apart, and within a year, the Great Leap metastasised into the Great Famine. Twenty million people died, and to cover the shame, Mao, in 1966 launched the Cultural Revolution. By 1978, Mao was dead and Deng had consolidated power. Deng put a stop to all that “we can do it on our own nonsense”, and set China on the path of genuine market reforms. The rest, as they say, is history.

This brings us nicely to Nigeria.
In 1976, Segun Obasanjo launched Operation Feed the Nation. Having decided that economic and social problems were the result of neglect of the agricultural sector, Obasanjo appealed to Nigerians to take to farming, increase food production, and reduce importation. Nigerians were encouraged to farm undeveloped building plots. This had the almost immediate impact of indiscriminate use of land for farming by people who had no knowledge of farming. Also, since we became shy of imports, we became shy of exports and well, there was nowhere to ship the announced surpluses to. Then there was the problem of continuity and corruption. By the time the Shagari government swung by, OFN had failed, Nigeria had entered a commodity-caused recession, and well, we blamed the Ghanaians and sent them packing.

All of this brings us to President Buhari’s failure to sign the African Continental Free Trade Area agreement. It is amazing that despite centuries of evidence that it does not work long term, the minds of Nigerians are still wired to be protectionist.

The arguments in favour of free trade were made by Adam Smith as far back as 1776: “It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.”

Simply put, if two parties want to swap something legally, nothing should stop them. They want to swap because it will make them both better off, and to hinder them is to cause harm. Both parties will suffer, as well as those who might have benefited if the trade had not been blocked.

It is not hard. Free trade is as simple as this: both Cheta and Oria can cook, both Cheta and Oria can wash plates, so Cheta cooks for both, Oria washes both plates. Cheta and Oria have swapped the proceeds of their labours, and have saved time and energy in doing so. Is there a point in both of us making separate pots of Indomie and washing separate pots when there is an advantage to using the same time and energy to do it once?

That is what those who are standing against the AfCFTA fail to get – no nation, Nigeria included, can do it all. The real work is in finding your comparative advantage, specialising in it, then trading it for what you’d rather not do. Any other road, is to bring suffering to the people.

]]> http://bartonheyman.com/africa-update-visa-launches-first-visas-everywhere-initiative-in-sub-sahara-africa/ Fri, 16 Mar 2018 11:29:35 +0000 http://bartonheyman.com/?p=4965 […]]]>

Today, Visa announced that its Visa’s Everywhere Initiative, a global innovation program that tasks start-ups to solve commerce challenges of tomorrow and further enhance their own product propositions and provide visionary solutions for Visa’s vast network of partners, will expand into the Sub Sahara Africa (SSA) region. Entrants in the first-ever Sub-Sahara Visa’s Everywhere Initiative will have the opportunity to compete for a chance to win up to US$50,000, access to Visa’s products and services, expert mentorship and support from Visa and exposure to key Visa partners and clients.

“In a highly dynamic industry, Visa’s Everywhere Initiative allows us to explore a host of ideas that solve business challenges, influence our product roadmaps, support our customers, and shape our culture of innovation,” said Andrew Torre, Regional President for CEMEA for Visa.

With just 17% of people in Africa having access to formal financial services, almost a third of funding raised by African startups in 2017 was in the Fintech sector. Venture funding for African startups jumped by 51% to R to $195 million in 2017.

“With over a hundred million dollars invested over the past ten years alone, the region’s Fintech industry is on the brink of a transformative breakthrough, and we believe the time is ripe to bring together its brightest minds and work on the next big idea in payments technology.  With a clear goal of enabling cashless economies and financial inclusion, Visa is committed to fostering an entrepreneurial spirit and driving innovation in its payments landscape,” added Geraldine Mitchley, Senior Director for Digital Solutions for Visa Sub Sahara Africa.

Beginning 23 March, Visa invites eligible participants in the SSA region to submit their business solutions that apply to one of the following three briefs:           

• How can your startup leverage Visa Developer APIs to either:  Enable smaller merchants to accept payments in-store digitally OR Provide a safe and secure solution for online merchants to drive eCommerce and reduce cash on delivery?
• How can your company use Visa’s APIs to leverage mass reach partner platforms like Facebook to help businesses operating in fast-paced consumer centric environments improve cash flow and receive payments?
• How can your startup leverage technology to provide services that are functional for illiterate customers to provide them with secure transaction experiences that build and enhance their confidence in the banking system?

Each challenge has been structured keeping in mind the niche dynamics of the local landscape. As the region’s domestic merchants rapidly expand their digital commerce proposition, payment gateways must also evolve at a breakneck speed to offer their customers a hassle-free shopping experience.

Sub-Sahara Africa is a diverse region and home to products like MPesa in Kenya, Snapscan in South Africa and Paga in Nigeria. Payment solutions like Scan to Pay or Tap with mobile are fundamentally shifting the way people pay to provide more convenient yet ultimately secure ways to pay and be paid.

Participants can access visa.com.za/everywhereInitiative for details on the Visa’s Everywhere Initiative from 23 March. Participants have until 17 May 2018 to submit their ideas, after which judges from Visa will select three finalists per brief to present their ideas to the judging panel at Visa’s local offices in the region.

One winner per brief will be selected, and each will receive a US$25,000 monetary prize. Winners of the prize will be invited to a working meeting with Visa, and may be presented with the opportunity to create a prototype. Visa will then select one overall winner to receive an additional US$25,000.

Visa’s Everywhere Initiative is part of a global implementation that is strategically important to the global payments company’s goal of fostering the growth of next generation payment technologies. To date, the program has had nearly 2,100 participating startups across North America, Latin America, Europe, Asia Pacific, Africa and the Middle East.

]]> http://bartonheyman.com/world-update-eu-aims-to-tax-internet-giants-at-two-to-six-percent/ Mon, 05 Mar 2018 11:13:29 +0000 http://bartonheyman.com/?p=4919 […]]]>

The EU will soon unveil a plan for taxing major internet companies like Amazon and Facebook by imposing a levy of two to six percent on revenues in every country where they operate, French finance minister Bruno Le Maire said Sunday. 

“The range will be from two to six percent; but closer to two than to six,” Le Maire told the Journal du Dimanche newspaper.

The European Commission has said it will present by end March an overhaul of its tax rules, which currently allow US digital economy giants to report their income from across the bloc in any member state.

That leads them to pick low-tax nations like Ireland, the Netherlands or Luxembourg, depriving other nations of their share of the revenue even though they may account for more of a company’s earnings.

“The heads of these companies know themselves that this system can’t continue,” Le Maire said.

Critics say the tax-avoidance strategies used by the tech titans known as GAFA — Google, Amazon, Facebook and Apple — deprive EU governments of billions of euros while giving them an unfair advantage over smaller rivals.

The Organisation for Economic Cooperation and Development says such strategies cost governments around the world as much as $240 billion (195 billion euros) a year in lost revenue, according to a 2015 estimate.

Asked if the proposed rate might be criticised as too low, Le Maire said: “I would rather have a law that can be implemented quickly instead of drawn-out negotiations.”

American tech giants appear to believe the European tax revamp is in the cards, with several already announcing pledges to pay more in each country where they operate as governments step up their fiscal demands.

Amazon said last month that it had settled a major tax claim in France and that it would start declaring all its earnings in the country.

]]> http://bartonheyman.com/africa-update-west-african-nations-set-to-import-products-from-12bn-dangote-refinery/ Tue, 31 Oct 2017 12:47:54 +0000 http://bartonheyman.com/?p=4211 […]]]> West African nations have started putting arrangements in place to enable them import petroleum products from Nigeria’s $12 billion Dangote refinery, barely two years ahead of its planned completion in 2019. Investigations by Vanguard showed that the nations which currently depend on the international market for supplies would be interested in importing commercial petroleum products from Nigeria because of proximity.

Some participants from Benin Republic and other nations who were in Lagos for the just concluded Oil Trading and Logistic Downstream Week who preferred not to be named because they were not permitted to speak disclosed in separate interviews that their nations looked forward to the 650,000 barrels per day refinery for supplies. Referring specifically to Ghana, Dr. Mohammed Amin Adam, the Deputy Minister of Energy said that it was interesting to know much about the $12 billion Dangote plant and the impact it would make in the region.

The Summit is the single largest Nordic Business Conference focusing exclusively on African markets in the Nordic countries (Denmark, Finland, Iceland, Norway and Sweden, including Greenland, the Faroe Islands, and the Åland Islands).

The theme for this year’s Summit is “How to Invest in Africa’s Transition” with the Vice President, Dr Mahamadu Bawumia being the keynote invitee.

Rich Ocloo, Francis Kwamena Acquah and Tete Kobla Agbota formed NorGhis in 2011 with the goal to make Ghana a visible investment destination for investors and businesses from Norway and other Nordic Countries.

Tete Kobla Agbota, the CEO of NorGhis, said a central strategy to achieve this aim has been to get prominent Ghanaians as keynote invitees to Nordic-African Business Summit.

Besides that, the Business Summit NorGhis relays information on business to authorities to advance the interest of Ghana.

“When we had the information that Norfund, the Norwegian Investment Fund for Developing Countries had decided to open an office in West Africa, we alerted former President John Mahama. We relayed what we have done for the office to be located in Accra. Acting upon this information, he met with the main decision makers when he was in Oslo in 2014,” he said.

Francis and Tete Kobla

He said the Norwegian Ambassador to Ghana, Hege Hertzberg, also gave them the needed support.

Some eminent Ghanaians who have been to the Nordic Business Summit include former President Mahama, former Minister Fiifi Fiavi Kwettey and the Asantehene Otumfuo Osei Tutu II.

Mr. Agbota disclosed that it has not been an easy job getting these prominent persons to Oslo as it requires hard work, perseverance, patriotism, dedication and a ‘large portion’ of voluntary spirit.

“We are grateful that Eivind Fjeldstad, the CEO of Norwegian African Business Association (NABA) agreed to invite the Vice President as the Keynote Speaker for the 2017 Summit,” he said.

Mr. Acquah said they have built a network of reliable individuals and organizations in Ghana, who have become a relevant conduit between investors and projects who can identify investment opportunities.

For instance, we have cooperation with INNOHUB Ghana via Nelson Amo and with Debenture Trust Company Ghana Limited, via George Ahiafor and Kwaku Agbottah.

Mr. Ocloo underscored the comparative advantage of Norway in Oil and Gas and Aquaculture which the country can take advantage of with the Vice President in attendance.

He disclosed NorGhis has plans on how these two areas can be harnessed to create wealth, jobs and reduce poverty.

Molahlehi is among Africa’s growing middle class who have money to spend and whose shopping habits have changed. With the surge of internet penetration on the continent, many Africans are easing into the habit of shopping online. According to a McKinsey’s Lions go digital report, online shopping could account for up to 10% of retails sales (with a value of around US $75 billion) by 2025, as more Africans gain access to the internet.

Created using Visme. An easy-to-use Infographic Maker.

The increasing access to the internet is seeing a rapid emergence of e-commerce sites eager to tap into the continent’s growing online consumerism. The likes of Nigeria, Kenya, and South Africa are at the forefront of this evolution. Companies such as Jumia, a Lagos-based online retailer, are dipping their finger in almost all major markets on the continent, cutting themselves an enviable piece of every pie. Jumia is also among Africa’s best-funded e-commerce sites, having raised US $150 million in funding in 2014.

As more people take to the internet to do their shopping, the demand for devices such as smartphones also increases. The 2017 Accenture Digital Consumer Survey finds that in countries such as South Africa, smartphone acquisition increased from 52% in 2016 and 63% in 2017. Some of the more technologically advanced nations like Kenya and Nigeria boast a smartphone uptake of more than 44% and 30% respectively. Across the continent, the number of smartphone users saw a nearly twofold increase, reaching more than 226 million. This spike in smartphone penetration is steering a digital revolution on the continent, exposing users to the endless opportunities the internet provides.

Here are some of the top e-commerce platforms in Africa that are reaping the benefits of the booming internet penetration on the continent.

JUMIA

With a mission statement and ethos for connecting African consumers and entrepreneurs to do better business together, Jumia is blazing the trail of e-commerce sites in Africa.

The company is creating a platform where small, medium and large African companies link with their potential market, thus creating a new-age ecosystem that bypasses the middle man.

Launched in 2012 in Nigeria, the site has solidified a footprint in over 23 African countries, with a network of over half a million sellers since its inception. Jumia has managed to create a stellar reputation for being a hub for products and services spanning across the retail, food and hospitality, talent recruitment, concierge and the hotel and catering industries. Apart from servicing the needs of consumers and businesses, Jumia has also been upskilling and aiding employment for many Africans who are qualified in areas such as Engineering, IT and online marketing and web development.

TAKEALOT

South Africa’s Takealot is the go-to online retailer for the shopper that seeks a convenient and simplified online buying and user experience. The site has been around for over a decade, having been established in the year 2002. Its broad catalogue and variety of products in entertainment gives it an impressionable edge. Customers can shop anything from books to games, computers and TVs.

Part of what makes Takealot an e-commerce success story is that the online retailer strives to provide its customers with the very latest products in the market, coupled with up-to-date product specification.

In April 2017, Takealot scored a significant investment of over US $69 million from Naspers, one of Africa’s biggest digital companies. This came after the online retailer received US $100 million investment from investment firm Tiger Global Management in 2014. Naspers boasts a 53,5% stake in Takealot, while Tiger Global owns about 34%.

KILIMALL

Kenya’s largest online shopping mall, Kilimall is relatively new in the e-commerce space but has remarkably managed to create an inter-continental mark since its launch in 2014. The site, now established in other countries such as Nigeria and Uganda, has a retail customer base that continues to boom.

Kilimall is known for providing electronics such as phones, computers and gadgets, stocking top brands such Samsung, Huawei, Lenovo, and Phillips. The site also offers other products such as home appliances, clothes, books, health and beauty products, and more. All its services are accompanied by a 7-day free return policy on their premium range of goods, making it an attractive choice for consumers.

KONGA

Konga has come a long way since its humble beginnings in 2012 as a Lagos-only e-commerce site that specialised in baby and beauty care. The online platform has morphed into a major online retailer, often dubbed “The Amazon of Africa.” In 2015, Konga joined forces with leading Nigerian banks to launch KongaPay, a safe and convenient online payment method to tackle the issue of trust in Africa when it came to online payments.

The online marketplace was one of the first in Africa to create a system of payment that was integrated with world banks – an innovation that uses click system that eliminated the sharing of sensitive information during payments.

With a backing from the South African media giant, Naspers, Konga is now a major player in the e-commerce space. In 2014, Naspers, which has a 50% stake in Konga, invested US $50 million in the online store.

BIDORBUY

Established in 1999, South Africa’s online store Bidorbuy is one of the oldest online marketplaces in Africa. What makes the site unique is that buyers don’t only get to purchase what they want, but they can also make a bid for products, functioning as an online auction. The site provides a platform to facilitate trade between buyers and sellers. Previously owned items such as antiques and collectables are some of the most popular on Bidorbuy, making up 40% of all items sold. Other second-hand products shoppers prefer include high-end DSLR cameras and lenses, laptops, books, as well as video games.

Over the years, Bidorbuy has made several acquisitions of South African online businesses. These include popular sites such as online jobs portal, Jobs.co.za and e-commerce company uAfrica.com.