5 Myths about trading in Africa

Recently a lot of focus has been on Africa and it’s growth economically, as one of the last untouched regions of the world. Most people have preconceived notions of the continent that can often be wrong. These clichés and caricatures give the wrong vision of Africa, so we wanted to set the record straight!

MYTH #1 : There are no entrepreneurs in Africa

The level of education in Africa is progressing, but it is the informal economy that will solve the skills gap and form the necessary human capital base. Official statistics on entrepreneurship and company formation are disappointing. However, each country in Africa has a certain number of businessmen who, with a usually small starting capital, succeed in their category. Some businessmen have taken risks and invested. Often with limited educational backgrounds, they have built empires. The most audacious have gone out of business to engage in more demanding capital, and riskier operations.

El Hadj Oumarou Kanazoé, CEO of the Kanazoé Group, has become number one in Burkina Faso in the construction industry by directly competing with big companies such as Bouygues, Colas and Sogea.

However, Kanazoé and other businessmen, deprived of management training, have demonstrated their abilities to manage large companies with limited means. They have gradually diversified their activities and expanded their businesses.

Entrepreneurs show their abilities and creativity in markets where there are many challenges.

MYTH #2 : Agriculture is archaic and frozen

Agriculture is one of the major growth sectors in Africa. It remains the largest contributor to employment and helps millions of people to emerge from poverty every year.
Across the continent, from north to south, from east to west, resources abound, There are many fertile areas across the continent that can be exploited, and the primary sector should play a leading role in economic growth.
Despite all the difficulties that Africa faces, some promising experiences can also be seen.

The rural community of Tonka in northern Mali is an example of the initiatives taken by the African locals, despite extremely unfavorable conditions. By digging simple irrigation canals from a river and a lake in the region, thousands of Tonka farmers in agricultural cooperatives were able to increase their production of rice, millet, potatoes, manioc, beans and other foodstuffs. Tonka’s market now attract buyers from other parts of Mali, and even from neighboring Mauritania. Thanks to the additional income from their production, Tonka residents have been involved in the construction of elementary schools, dispensaries, several wells, livestock markets, a warehouse and several sanitation facilities.
The example of Tonka, Mali, shows that sustainable land management combined with peasant farming can be very successful. Under severe climatic conditions, this region of Mali has become an example of efficiency and productivity. Through their knowledge of the environment and the use of polyculture, which helped to counteract the lack of fertilizers and to reduce soil depletion, these farmers avoided a more degraded situation. This proves that the know-how of the African peasant should not be in doubt.

MYTH #3: African economies only produce raw materials

The growth of many countries in Africa is directly linked to their exports of raw materials. However, the African economy is also a cradle of innovation. “When compared to Singapore and its 2% of GDP in research and development, Africa is below. However, this gap is reduced very quickly with hubs and willingness to overcome infrastructure deficit, for example,” says Stephane Colliac, Senior Economist at Euler Hermes, the world’s leading credit insurance company.

According to the UNESCO Institute for Statistics (UIS) 2016 report, about Global Investments in R&D, no African country has achieved the intended cost about the investments in R&D of 1% of GDP by 2020 established by the African Union. However, some countries are close which are Kenya with 0.8% of GDP, followed by Egypt, Morocco, South Africa, and Mali with 0.7%. This innovation effort is also reflected in the creation of technology hubs. These poles are increasingly numerous on the African continent. There are 24 in South Africa like “Silicon Cape Initiative” or “Black Girls Code”, 11 in Kenya like “iHub” which has contributed to the development of 150 companies since 2008 and 8 hubs in Egypt like “Cairo Hackspace” and “IceCairo” which have a primary role in the future development of the continent’s economy.

MYTH #4 : African infrastructure is non-existent

Infrastructure is a considerable challenge in the continent of Africa: access to drinking water, electricity, Internet, the delay remains important.
A World Bank diagnostic study shows that, due to the large transport deficit, it costs more for landlocked countries to export by sea than by air, despite the fact that air transport is typically three times more expensive. The example of Nigeria is striking: in order to close its infrastructure gap, the country will have to spend $ 1.9 trillion by 2030, or nearly $ 130 billion a year (25% of current GDP). This delay penalizes African economies and costs the region two growth points each year according to the African Development Bank.

The continent still isn’t a major source of exports, despite its vast size its consumer markets are tiny in comparison to Asia, Europe or the Americas. So Africa seems relatively unimportant for the transportation and logistics industry. However, according to the word bank logistics performance Index, South Africa stands out, ranking #1 in Africa and #20 in the world (out of 160 countries). Egypt scores well too, ranking #49 worldwide.

According to a study carried out by PwC, one of the Big Four auditors, along with Deloitte, EY and KPMG, while none of the African countries comes close to the United States and China, South Africa’s overall transport infrastructure scores almost identically to India’s, and better than Indonesia’s, lauded by many as one of the next economies to watch. Egypt and Kenya score lower, but they’re still ranked higher than Vietnam, another of Southeast Asia’s growing economies.

MYTH #5: The continent is isolated from the world

The ability of some microenterprises and SMEs to compete in international markets is very often undermined by poor product quality, lack of knowledge and information about customers. Trade barriers and costs further undercut their competitiveness. As a result, these businesses stand little chance of engaging in and sustaining trade. On the import side, trade barriers and costs also prevent businesses and populations at large from accessing technology, inputs and products.

Nevertheless, the foreign trade of African countries is constantly growing it remains the most powerful engine of global economic and social development. This relationship between development and integration in international trade is made by the Enabling Trade Index (ETI) report, which provides an overview of world trade, by analyzing the performance of 136 economies, including their integration and their openness to internal and external markets. The report looks at the public institutions, infrastructure, policy and facilities offered in trade with domestic and foreign markets.

Five African countries stand out as leading continental figures in terms of facilitation, integration and openness in international trade. The first African country on the list is Mauritius #39, which often shines in the international rankings, followed by Morocco which previously has been placed in the 52nd place, the Kingdom of Morocco climbs 3 places ranking #49 worldwide. Right after, we find Rwanda (#50), South Africa (#55) and Botswana which is one of the continent’s leading economic examples, by applying zero tolerance to corruption and exporting mining products. In the ETI 2016 index, Botswana closes the top 5 by being in the 65th place out of the 136 countries in the classification.

Globalization has definitely contributed to lifting millions out of poverty. In many countries, integration into the global system has dramatically shifted production structures, allowed for specialization according to their comparative advantages and created employment opportunities.

It’s true that the continent of Africa still has a lot to prove, lots of challenges to overcome and is still behind some developed countries. However, a real significant progression can be seen to have taken place.

Sources :

– World Bank report : http://lpi.worldbank.org/international/global
– PwC Report : https://www.pwc.co.za/en/assets/pdf/africa-gearing-up.pdf
– WEF: The Global Enabling Trade Report 2016 http://www3.weforum.org/docs/WEF_GETR_2016_report.pdf

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