Kathy Gibson is at the World Economic Forum on Africa in Cape Town – Africa is still growing faster than the rest of the world, but needs to shake off a dependence on commodities to embrace digitalisation and unlock greater potential.

Lesetja Kganyago, governor of the South African Reserve Bank, points out that sub-Saharan Africa’s growth of 3,5% would be more than 5% if the two largest economies, South Africa and Nigeria, were removed from the equation. These two countries are still largely reliant on commodities.

To achieve elusive growth goals, he believes Africa needs to take advantage of globalisation opportunities while simultaneously driving for more intra-continental trade.

“The Free Trade Agreement is a big issue,” Kganyago says. “African countries have not been trading with each other.”

Reasons for poor intra-African growth include border issues and poor infrastructure – although building infrastructure is itself a growth opportunity.

Olusola David-Borha, chief executive: Africa at Standard Bank Group, points out that there is still growth on the continent, despite headwinds.

“The convergence of technology and innovation in various sectors are finding substantive solutions to problems, that are helping to drive growth,” she says.

The new free trade dispensation is a game-changer, David-Borha adds. “It creates a market of 1,2-billion people with a combined GDP of $3,4-billion.

“Yes, trade has been occurring in formally, but the Free Trade Agreement helps to formalise a lot of what is going on. It also helps to provide a standard to measure all countries on.”

No matter how small the growth in intra-African trade will be as a result of the agreement, David-Borha says it will still be huge.

Challenges to achieving this growth include infrastructure, but this can largely be offset by new digital infrastructure. This has been recognised by hyperscale players AWS and Microsoft, both of which have opened data centres on the continent. In addition, Telkom has a solid footprint in Africa.

“Digital solutions will enable African trade, with a combination of infrastructure and digital platforms,” David-Barho says.

Albert Zeufack, chief economist: Africa at the World Bank, believes that Africa’s recovery remains fragile.

“We still have five of the fastest-growing economies on the continent and they continue to power ahead. But the macro-economic outlook is mostly on the downside.”

Zeufack says risks include growing global trade tensions that are tending to lower global growth; volatility in commodity prices continuing to undermine growth in large African economies; the challenge of inclusion relating to jobs and opportunities; and sound fiscal policies.

It is hoped that the creation of the free trade zone for Africa will see a doubling of intra-continental trade, but Zeufack thinks this is “ambitious but not impossible”.

It is positive in that Africa is embracing trade at a time when the rest of the world is raising barriers, he adds. “It is a great achievement and the right move from our leaders. It certainly is one of the biggest achievements of the African Union (AU) since its inception.”

He adds that there is still work to be done before it can become a real force for economic transformation. “And we need infrastructure for that trade to take place.”

Zeufack believes we need to build intra-African value chains that will help to create jobs. The free movement of people will also be a key enabler.

Will the Free Trage Agreement ignite growth? “To solve that we need to get to understanding the sources of growth on the continent,” Zeufack says.

“It is clear that our growth is very volatile because the largest economies are commodities dependent. So we need serious structural change, switching growth from agriculture and mining to services and manufacturing for countries that can still do it.”

Kganyago points out that, while governments are driving the Free Trade Agreement, it is private companies that trade with one another. “So there has to be a conversation involving the companies doing the trade. They need to tell us what barriers they are facing what they would like to see cleared.”

Paying for the required infrastructure is a huge hurdle, David-Borha points out. “The reality is that the public sector does not have sufficient capital to deliver the required infrastructure. So there has to be collaboration with commercial banks and a range of other financiers.

“The only way you can get all these stakeholders working together is if you have a clear regulatory framework and transparent governance.”
Ground rules on how risks are shared is also important.

Zeufack points out that the infrastructure build in Africa will require about $90-bllion a year. Currently there is a $48-billion gap which can only be funded by public-private partnerships and commercial banks.

Kganyago believes the private sector has a role to play in this infrastructure build. “The big resources are in the private sector,” he says. “So how do we mobilise the private sector from Africa and from elsewhere? We need to change the conversation.”

While big corporates are going to be key to building the African infrastructure, David-Borha says the entrepreneurs and small to medium enterprises (SMEs) are the engine of the African economy.

“Africa is driven by SMEs and small traders. Now they are constrained by access to affordable finance, logistics, and the ability to move money and resources around.

“We need to think about how we enable these entrepreneurs, enable them to run their businesses, and enable the unemployed youth.

“With a digital infrastructure it is easier for these businesses to grow on the back on telecommunications and access to communications.”