Seeds of Opportunity: The African Growth Series
October 2022 | Issue 2
In this week's issue, you will learn more about:
- Central Africa’s Proposed New Oil and Gas Pipeline
- Global Garbage, Africa's Burden
- Crypto-Currency Regulation and Innovation in Africa
- East African key pockets of opportunity
Central Africa’s Proposed New Oil and Gas Pipeline
Energy access in Africa continues to be the main economic drawback keeping the continent from developing further. In Africa, around 600 million people still lack access to electricity, and most live in remote rural areas. The Central Africa sub-region has the continent’s poorest electricity access rates, making it one of the poorest electricity regions in the world. While other parts of Africa have benefitted significantly from new energy discoveries and electricity network expansions through international investments in renewable capacity, Central Africa has been mainly left behind. The region relies heavily on hydropower for its electricity generation, exposing it further to the impacts of climate change and its associated effects on hydropower generation. Now though, a large cohort of Central African countries have banded together under the mutual aim to raise its electrification rate by building an oil and gas pipeline network involving most of the countries of the region and Africa’s second-largest oil and gas producer, Angola. The project aims to build a 6,500 km long oil and gas pipeline, including storage depots, liquified natural gas terminals, refineries and gas-fired power plants. While Africa is enriched in natural energy resources such as oil and gas, the project’s financing draws skepticism. Western countries, such as those in America and Europe, are reluctant to fund any new oil and gas projects in Africa as the world transitions toward renewables despite the supply crisis caused by Russia’s war with Ukraine. Funding would therefore have to come from countries such as China, India, or Russia, which are not the most favourable candidates. Proponents of oil and gas developments argue that pipeline development can considerably alleviate energy poverty in the region and bring about much-needed economic growth. Moreover, retrofitting these kinds of pipelines at nominal costs to carry hydrogen in the near future can further aid the continent’s transition to clean fuels. While opponents rightfully argue that future developments should be sustainable, African countries cannot develop sufficiently with renewables alone and rely on some bridging fuel. It all comes down to a balanced energy mix that enables Africa to develop its economy at a fair rate and achieve its deserved economic position.
Global Garbage, Africa's Burden
Developing countries have become the world's dumping ground and North Africa is an entry point and destination for Europe’s garbage. Europe ships waste to legitimate North African pollution-control countries that can recycle the waste. However, the technological skills within these countries may not be able to recycle the waste, resulting in serious environmental harm and health problems for African citizens. To add fuel to the fire, whilst 20% of all generated waste ends up on illegal dumping sites in Europe, 50% ends up in Africa. In fact, between May and July 2020, various cargo ships from Italy docked at Tunisia's port of Sousse and offloaded almost 7,9 thousand tonnes of dangerous waste. This is legal as agreements between these countries let one subcontract their waste management to another country to reduce the cost of recycling or incineration of waste. However, organised criminal groups have capitalised upon the legal murkiness and turned this into a billion-dollar illicit industry. The waste market is booming as Sub-Saharan Africa's (SSA) volume of waste will triple from 2016's 174 million tonnes per year to approximately 516 million tonnes per year by 2050. Whilst tackling the legal and illegal waste generated by industries such as manufacturing, projects such as TrashOut aim to reduce waste generated by citizens. The project builds machine learning models on illegal dumping sites to map and monitor patterns of what causes illegal dumping and predict potential dumpsites to prevent future dumpsites. 19 of the world’s 50 biggest dumpsites are within SSA which has driven research into using geographic information systems (GIS) and object mapping to track illegal dumps in Paarl and Soweto within South Africa. Waste management can be improved by implementing, testing and developing the right technological solutions worldwide.
Crypto-Currency Regulation and Innovation in Africa
According to the United Nations Conference on Trade and Development, cryptocurrencies are gaining traction in Africa, and the Global South. This is indicated through the significant use of digital coins in countries in Sub-Saharan Africa, such as Kenya (8.5%) and Nigeria (6.3%). In fact, the Bank of Namibia (BON), Namibia’s central bank, has declared that it includes virtual assets and virtual asset service providers, under its Fintech Innovations Regulatory Framework. While the BON has historically had a negative outlook on cryptocurrencies – and did not support or recommend the possession or trading of such currency - it now highlights that traders may receive payment in this form if they are willing. This is a development that indicates that while crypto-coins – such as Bitcoin – are not currently considered legal tender in Namibia, the BON now allows trades or exchanges to be made with such currency. This is certainly a move towards joining the divide between regulated and unregulated currency in Namibia, and an acknowledgment of the use of cryptocurrencies within Africa. In fact, Central Bank Digital Currencies (CBDCs) are currently in development in South Africa, where the South African Reserve Bank (SARB) is working on Project Khokha. Project Khokhaaims contributes to the global assessment of the application of distributed ledger technology (DLT) and has been recognised as the best DLT in South Africa. Khokha has achieved numerous goals, such as enhanced privacy while meeting required transaction volumes, and exceeded the transaction performance target – at 70,000 transactions in less than 2 hours. While there is still room for growth in this space, it is an indication of a step towards cryptocoin regulation as well more efficient traditional banking in Africa.
East African key pockets of opportunity
Tanzania is set on strengthening its position as a key performing economy and gateway market for trade in East Africa. As recently announced, the country will establish through joint collaboration, a $300 million worth economic zone, spanning 650 acres of land. The zone will help facilitate intercontinental trade to no less than 18 land-locked countries in the region. Key infrastructure and technology on the site will include Artificial Intelligence (AI), E-commerce, a container depot, a 3PL Warehouse, etc., to help facilitate smooth trade. As expressed by key stakeholders, the zone establishment will be implemented in a six-phase process each requiring about $50 million, with phase one beginning in 2023. Project stakeholders include ZDS Developments in partnership with Siginon Logistics EA Limited and Rift Africa have opened the call to investors and have already expressed the interest of at least five international investors.
The expected outcomes from this project will benefit both the macro economy, through increased foreign direct investments will also facilitate the growth of micro-economies through SME support and over 3000 new jobs. The project has great potential to drive economic and business recovery post-2020 and attract key investments for the region.
To find out more about opportunities in Africa, please contact Lynne Martin.
