Seeds of Opportunity: The African Growth Series
June 2022 | Issue 4
In this week's issue, you will learn more about:
- JOIN THE DEBATE: Fixing the economy to improve livelihoods
- Electricity Supply and Demand in African Power Pools
- Dow Expands Flexible Packaging Recycling Effort Across Africa
- Doing Business in Côte d'Ivoire
- Tanzania's Innovation Economy
- Unlocking Capital for Mini-Grid Projects in Africa
- Think Tank: Energy in Africa
JOIN THE DEBATE: 'Fixing the economy to improve livelihoods'
As we finally enter the tail end of the Covid-19 pandemic in South Africa, the country needs to rebuild, particularly in the face of structural unemployment.
Tomorrow 24 June at 10h05, join moderator Gugulethu Mfuphi and expert panellists Hendrik Malan (CEO: Frost & Sullivan Africa), Nontobeko Hlela (Researcher: SA Office of the Tricontinental Institute for Social Research), Jan Bouwer (Chief of Digital Platform Solutions: BCX), Azar Jammine (Chief Economist: Econometrix), Eustace Mashimbye (CEO: Proudly South Africa) and John Dludlu (CEO: Small Business Institute) as they discuss the topic ‘Fixing the economy to improve livelihoods’ and how business can step up to deliver real social impact as we embark on a path to post-Covid socioeconomic recovery.
Frost & Sullivan is excited to be participating at this year's Directors Event taking place on Friday 24 June from 09h00 - 12h30 SAST.
Register for free HERE.
Electricity Supply and Demand in African Power Pools
It is often argued that Africa has insufficient electricity available to meet its demand. While this is true, the actual supply and demand throughout the African continent appear to be evenly balanced. Supply is calculated based on electricity generated by all technologies each year and demand is derived from the actual amount consumed by the off-taker industries. Supply generally outweighs demand by up to 5% in all power pools except for the SAPP, where supply and demand are virtually even and in the WAPP where supply lacks demand by 20%. While the generation is technical of a sufficient standard, the available capacity coming from the power plants is on average almost 40% less. This decrease in installed capacity can be traced back to both scheduled and unscheduled maintenance of power plants as well as old, ailing and inefficient T&D infrastructure incapable of transmitting the generated electricity it the end-users. Nigeria for example has a substantial installed capacity of 13.5 GW compared to the country’s peak demand of 8.5 GW. Generation and supply should therefore be adequately sufficient to address the national demand. However, because of the inadequate state of the T&D infrastructure, and inconsistent shutdowns of power stations, most of this capacity is lost or remains unused, resulting in only 3.7 GW of available electricity to end-users. It appears that fixing and extending the transmission infrastructure in tandem with the construction of new renewable sources would greatly aid Africa’s attempt of improving its economic state as the supply of reliable electricity is the lifeblood of any successful business. Improving the electricity infrastructure should be of utmost importance to all African economies as this will lead to an increase in economic activity, especially in the manufacturing sector.
Dow Expands Flexible Packaging Recycling Effort Across Africa
Following a successful pilot phase in Nigeria, DoW Chemicals has decided to expand its flexible packaging recycling initiative - Project REFLEX into Egypt and Guinea. The project launched in 2020, targets flexible packaging such as plastic water sachets that show communities that this can be collected and recycled to be used in new, quality packing applications. The post-consumer recyclate (PCR) that was created in the pilot phase is currently being trailed by a large brand owner that makes use of it in some of their non–food applications. Through this project, DoW aims to divert 10,000 Metric Tons (MT) of flexible packaging waste by 2025. This will further support Dow’s global commitment to help advance a circular economy for plastics and reduce plastic waste. While creating job opportunities for over 50,000 waste collectors in Egypt, Nigeria and Guinea. Project REFLEX further aims to increase flexible packing recycling in Africa that will establish a market for recycled contents while addressing the water issue in many African countries.
Doing Business in Côte d’Ivoire
The Ivory Coast has the largest population and economy in Francophone West Africa. Both metrics are attractive to businesses and in 2012 the country established the Investment Promotion Centre (Centre de Promotion des Investissementsen Côte d’Ivoire (“CEPICI”)) as a one-stop shop for business registration. Further changes in their legislation have moved Côte d’Ivoire up in the World Bank Ease of Doing Business rankings, from No. 170 (out of 190 countries) in 2010 to No. 110 in 2019. More of these changes continue to simplify the process of starting a business, getting credit and paying taxes for new and existing businesses. The country has the lowest corporate tax rate in the region at 25% and proposed a Start-Up Act in 2020 to support new companies by increasing funding whilst minimizing the regulatory and administrative hurdles of running the start-up. A founder can theoretically register a new business within 48 hours, and this has attracted startups from its neighbouring countries (Nigeria, Ghana, and Senegal). Flutterwave was founded in Nigeria in 2016, however, the start-up grew substantially after its launch in Côte d’Ivoire because of the large economy and ease of doing business in the country. Flutterwave’s headquarters have moved, but the remaining top 10 start-ups have raised more than USD 57 million in funds from local and foreign investors. The opportunity for businesses to find success in the country is not limited to start-ups, the international telco Orange launched Orange Bank Africa (a completely mobile digital bank) in July 2020 and has managed to attract over 800,000 customers to date. Côte d’Ivoire is an example of how enacting legislation geared at serving business interests can attract investment to Africa. This could enable developing economies to take full advantage of the funding and knowledge opportunities.
Tanzania's Innovation Economy
Tanzania is on a solid track to grow and develop its innovation economy. As determined through ecosystem analysis, Tanzania currently ranks third in Africa for digital competitiveness, after Egypt and Gambia. In addition, Tanzania has been identified as 5th in Africa for the Global Innovation Index (GII) 2020. However, despite these figures, only 159 start-ups were established in Tanzania in 2020 – a strikingly low statistic in comparison to Kenya (where 600 new companies were formed the same year). It is hard to reconcile this data with the fact that 83% of the population is currently self-employed, pointing to pitfalls in entrepreneurial skills and business development as the main restraints in the innovation economy. Therefore, it is vital that the country’s clear level of innovative capacity is met with a population skilled in business knowledge in order to assist creators of innovative products or services to capitalise on their inventions and solve the gap in the innovation index. Private sector recognition of the potential for growth in this space has ben indicated by Vodacom, who participated in the Tanzania Innovation Week which was spearheaded to foster innovation at a rate compatible to transform the economy. Moreover, Vodacom has collaborated with SmartLab to set up a Digital Accelerator Programme to empower start-ups through mentorship, connectivity and ICT development skills. Internationally, the opportunity presented by consistent growth in this sector has been validated through France’s injection of €570,00 to support higher education and the role they play in boosting the link between innovation and entrepreneurship as well as Italy granting a loan of €19 million in loan to ensure technology transfer and growth. Ultimately, the untapped potential in Tanzania’s innovation economy leaves room for expansive growth in the region as well as the continent at large.
Unlocking Capital for Mini-Grid Projects in Africa
Africa’s first mini-grid project financing facility raises an additional $25 million in funds to help unlock the potential of the solar mini-grid market in Africa. The Cross-Boundary Energy Access Program, launched in 2019 has announced that the funds will be deployed to help near-term solar mini-grid projects in its pipeline over the next two years. With an energy poverty problem, where over 600 million people in Africa have no access to electricity, the investment is a timely one. Solar mini-grids are an important bridge for achieving energy accessibility in rural areas in Africa. Aside from rural electrification, CBEA has undertaken projects to support businesses, with its footprint covering Kenya, Rwanda, Nigeria, Ghana, etc. Key stakeholders that have made the most recent commitments to the facility include ARCH Emerging Markets Partners Limited, Bank of America, and Microsoft Climate Innovation Fund, whilst the original pioneers in 2019 were Rockefeller Foundation, Ceniarth, DOEN Foundation, Shell Foundation, and UK Aid. As 2030 draws closer by the day, unlocking Africa’s renewable energy potential is imperative to achieve Goal 7 of the sustainable development goals. The IEA estimates that overall the solar mini-grids sector needs $187 billion in investments to achieve the 2030 goals, thus pioneering financing programs like the CBEA steps in the right direction.
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Think Tank: Energy in Africa
In this Think Tank, Frost & Sullivan has brought industry experts Hendrik Malan (Africa CEO: Frost & Sullivan) and Patrick Prestele (Energy & Power Consultant: Frost & Sullivan) to address Africa's lack of essential access to electrification, how the energy requirements will have to be met; as well as the opportunity for private-sector stakeholders to get involved in the energy and power sector.
Click HERE to register and be a part of the conversation on Thursday, 14 July at 15h00 SAST.
To find out more about opportunities in Africa, please contact Lynne Martin.
