Seeds of Opportunity: The African Growth Series

In this week's issue, you will learn more about:

AFRICA TREND: Public Transport - growing Africa's BRT Networks

Public transport systems play an integral part in Africa, with many Africans dependent on road transportation as the primary source. In leading markets like South Africa, the transport sector contributes at least 6.5% (R333.8 billion) to the country’s GDP and supports over 1.5 million people through employment. Yet in a recent analysis, only about 34% of respondents recognise public transportation systems in their area as good, an issue present across Africa. The need to cultivate change across the board is urgent. Progress is present in some African markets in improving the public transport systems, with the growing development of bus rapid transit (BRT) systems. Africa has an overall BRT network length of about 152 km, a fragment of 2,003km, and 1,691 km in Latin America and Asia. However, the rate of development is speeding up in five key markets in Africa, including the City of Cape Town's BRT system (MyCiTi), where dedicated bus lanes, off-board fare collection, and pre-paid boarding has been introduced allowing for a faster and more efficient system. Following this are BRT systems in Lagos, Nigeria introduced by the Lagos Metropolitan Area Transport Authority (LAMATA-NG); Dar es Salaam Rapid Transit Agency (Dart), Kigali, Rwanda and Accra, Ghana. Through Dart, Tanzania secured $97.7 million (Sh219 billion) in late 2022 for other stages of implementation. The challenges faced by Africa's transport sector cannot be addressed solely by the government, but private sector participation is required.

AFRICA OPPORTUNITY: PSP in South Africa's Transmission Sector

South Africa’s public energy utility Eskom continues to struggle to supply the country with secure, reliable and modern energy, mainly caused by the failing and rapidly ageing coal power fleet. An additional emerging threat to the reliable power supply comes from the currently limited transmission & distribution (T&D) network. Even though South Africa’s T&D network is one of Africa’s most developed, Eskom’s grid was built to generate electricity in the eastern part of the country near the coal fields and then send it to the other provinces in a unidirectional flow. However, the highest potential to generate the cheapest electricity is in the northern and western cape, provinces where the grid is already at capacity. It has been estimated that Eskom requires an additional 8,500 km of transmission lines to support the increased generation capacity and limited load-shedding in the near future. This is a monumental task for the cash-strapped and highly indebted utility. One way to help achieve the targets set by the government is to increase the level of private sector participation (PSP) in the energy sector. Several types of private sector participation models apply to T&D, including service contracts, management contracts, lease agreements, concessions or divestitures.

South Africa’s energy minister Gwede Mantashe clarified that complete privatisation of the utility is not on the cards, leaving concessional agreements as the best option for Eskom. One potential business model includes the Independent Power Transmission (IPT) model, where concession-style contracts (similar to PPAs) are awarded for the rights to a single or small number of transmission lines. IPTs must be awarded through tenders whereby the contract is awarded to the bidders offering the lowest cost-of-usage charge. Bidders must guarantee universal access to the transmission line, ensuring the reliability and availability of service, and, depending on the contract, build and operate new network lines. Transmission lines procured under an IPT model can operate alongside a publicly-owned grid without impacting its operation and maintenance, rendering IPTs a lower-cost method for expanding the transmission grid. Similar to IPPs, IPTs have access to new diverse funding previously unavailable to public utilities, a massive opportunity for Eskom to overcome its challenges in grid expansion. The opportunity is now, sooner rather than later, for South Africa needs to follow other African countries (such as Ghana, Kenya, Nigeria, Uganda, Morocco, etc.) in enabling the private sector to participate in the entire energy sector.

AFRICA OPPORTUNITY: The Practical Use of AI in Africa

In a world where AI is set to boost the global economy by almost $16 trillion by 2030, Africa stands ready to embrace this transformative technology. Despite the potential for job displacement, the continent is making remarkable strides. From revolutionising clinical documentation to combating malaria and transforming agriculture, learn how African innovators are harnessing the power of AI. With significant acquisitions and diverse investment scope, Africa's potential in AI is vast.

In this video, Frost & Sullivan Africa Management Consultant Sisonke Mgwebi discusses the practical use of AI in Africa - https://youtu.be/a3c7VPsHxC8.

AFRICA OPPORTUNITY: Africa Investment Forum highlights four new green energy projects

Africa’s renewable energy sector continues to grow, with four new projects worth nearly $1.5 billion presented to investors at the African Development Bank. ​ The four deals are spread across North Africa, West Africa, and Southern Africa, covering hydropower, plastic recycling, and a hybrid hydrogen feedstock/ ammonia project Africa’s green energy sector investment landscape is not lacking in terms of the number of projects or pipelines, but a gap lies in mobilizing project financing. With over 90 deals valued at $62.9 billion from Africa’s Investment Forum’s pipeline alone, green growth projects are clearly present. The 90 deals classified were all in either capital raise or bankability phases. Speaking at the recent Enlit Africa 2023 conference, Africa CEO at Frost & Sullivan Hendrik Malan, noted some challenges potential investors face as a lack of fit in terms of risk and profit portfolio. Achieving climate and green growth in Africa requires mobilizing private sector financing from investors including venture capital, private equity, and debt finance institutions is critical.

​As Africa is one of the world’s most vulnerable regions to climate change and suffers from energy poverty, it is vital to drive the urgency for green energy investments.

ESI Africa: Africa's Energy Investment Landscape dominated by Renewable Projects

''Overall, ongoing infrastructure projects totalling $353 billion in investments spanning 165 projects have been committed to. But the weak legislative frameworks and the perception of a lack of projects are hampering more investment in Africa''. Frost & Sullivan Africa CEO Hendrik Malan was speaking at Enlit Africa 2023 on 'Tracking Project Development in Africa'.

Learn more here: https://lnkd.in/dCT3WgWA.

UPCOMING EVENT: African Continental Free Trade Area Conference 2023 (AfCFTA)

Frost & Sullivan Africa is excited to participate in this year's The African Continental Free Trade Area (AfCFTA) Conference 2023 from 28-29 June, Cape Town, South Africa. The AfCFTA Conference will present the Agreement, the opportunities it creates, the anticipated economic benefits, and potential pitfalls.

Join Research Director for Frost & Sullivan Africa, Craig Parker, on 29 June at 09h00 as he presents on ''Logistics Infrastructure is the Cornerstone to Sustainable African Trade''.

Click here to register: https://lnkd.in/dXwUnEtm.

For further inquiries, please get in touch with Mr. Mlambo on +2721 556 9253, alternatively WhatsApp on +2779 013 7629.

UPCOMING EVENT: Transport Evolution Africa Awards

We proudly announce that Frost & Sullivan Africa's Partner & CEO Hendrik Malan will be part of the Judging Panel for the Transport Evolution Africa Awards taking place on 21 September at the Durban ICC.

Looking for more information or have a nominee in mind? Click the link below to learn more about the Awards and to submit your entry - ​ https://lnkd.in/eEdGqBqk 

Please note: Nominations close on 23 June 2023. 

To find out more about opportunities in Africa, please get in touch with Lynne Martin.

Lynne Martin

Sales Contact, Frost & Sullivan Africa

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lynne.martin@frost.com+27 21 680 3260