Seeds of Opportunity: The African Growth Series
June 2022 | Issue 3
In this week's issue, you will learn more about:
- Natural Gas in Africa
- Volkswagen Group looks to reduce its fresh water usage
- Mobile Money Africa
- Economic Growth in Liberia
Natural Gas in Africa
Developed nations should enable developing regions such as Africa to take advantage of their natural gas resources and exploit these reserves despite the urgent need to cut global greenhouse gas emissions. Africa needs natural gas as a baseload source which is required for the just energy transition it is facing. Some 600 million people in Africa, mainly in rural, disconnected areas, are still without access to electricity, while a total of 900 million people continue to rely on biomass or dirty cooking oil stoves. These stats are expected to continue as the current development of the T&D infrastructure is too slow to meet the growing demand due to a rise in population growth. Natural gas is a key source of energy and can act as Africa’s energy bridge while the continent gears up its renewable energy capacity, with further plant repurposing to green hydrogen possible in the future. However, the sector is facing major hurdles, with Europe, one of Africa’s leading energy sector investors, stopping funding of overseas fossil fuel development from the end of 2022 shifting about US$33 bn a year away from fossil fuel to clean resources. While the age of oil and coal are certainly in the past, natural gas should be used as a transition fuel for Africa and other developing regions to enable a just energy transition while driving economic development. Africa needs reliable, modern and continuous energy supply to overcome its inherent economic challenges, but once this is enabled, the economic opportunities are endless.
Volkswagen Group looks to reduce its fresh water usage
The Eastern Cape is facing a water crisis as more cities and metropoles are having to face water shortages as authorities are forced to implement ‘water shedding’. Dams in the southern part of the Nelson Mandela Bay municipality are at critically low levels, causing surrounding residents, businesses and industries in the area to limit their water usage. To reduce some of the pressures on the water system, The Volkswagen Group South Africa (VWSA) has announced two projects to dramatically reduce its environmental footprint while reducing its freshwater consumption. The first project, aimed at reducing the group’s reliance on municipally supplied water will include the construction of a wastewater recycling facility that will recycle production-related wastewater from various production areas for reuse. The aim is to reduce the company’s freshwater consumption by 26%. The second project will reduce the group’s carbon footprint by installing solar photovoltaic panels and improving the area’s biodiversity by replacing alien plants and trees with water-wise plants such as the spekboom.
By making these commitments, the VWSA aims to achieve carbon-neutral production by 2030.
Mobile Money Africa
Mobile money is a payment system where mobile operators offer users accounts for money transfers, payments, savings, and other financial services. These accounts are accessible from the subscribers’ phones and all transactions are recorded and authorised in real-time using SMS. Converting the electronic value into cash (and vice versa) happens at retail stores (or agents). This technology increases financial inclusion for under- or unbanked populations by enabling users to pay for day-to-day shopping and bills with their phones, without the need of having a bank account. The technology is popular across African nations, which accounted for over 70% of the world’s USD 1 trillion mobile money transactions in 2021. The East African region held almost 60% of that value with pioneering countries such as Ethiopia launching Telebirr in 2021, a mobile network operator (MNO) focused on mobile money. In the same year, the Central Bank of Nigeria granted ‘Approval in Principle’ to leading MNOs to enable them to run mobile money services in the country. Since 2011, Sub-Saharan Africa’s mobile money market has grown 13-fold, which created two types of mobile money markets; long-established ones and the markets ripe for growth. An example of the latent demand is only 20% of the region’s 621 million registered accounts being active, meaning that 80% of existing accounts are inactive and the market has an opportunity to grow the deficit between active and inactive accounts. Service providers and regulators could work to meet latent demand and grow the market well above its 2021 value of USD 701 billion.
Economic Growth in Liberia
Liberia is on an upwards trajectory, recovering from the Ebola outbreak and the Covid-19 pandemic. While there has been fiscal contraction over the past two years, the economy is expected to increase for the first time since 2017. The informal market is the cornerstone of Liberia’s economy, with micro, small, and medium enterprises (MSMEs) piloted by women and youth entrepreneurs at the forefront of this sector, creating jobs and providing employment. However, a key constraint within developing MSMEs is the lack of funding. In order to address this, the Liberian government has implemented the Pro-Poor Agenda for Prosperity and Development (PAPD). The PAPD is a 5-year national plan to increase job production within this field and curtail poverty, a crucial goal as more than half the population of Liberia currently lives in poverty. In addition to the PAPD, the United National Development Programme (UNDP) has deployed the Growth Accelerator Liberia programme to support impactful ventures to scale up and access funding of up to US$40,000. The challenge mainly targets seven counties within the country; however, applications are open to all residents of Liberia. The main sector focus is on entrepreneurs and agricultural cooperatives. One of the winners from 2021, Nimba Venture, addresses the perennial scarcity of snails during the dry season in Liberia. To date, the business has been profitable and currently mentors 75 young entrepreneurs in running their own businesses. This programme highlights the importance of fostering innovation and indicates the nuance of innovative start-ups within Africa, as well as the massive space for growth opportunities in Liberia.
To find out more about opportunities in Africa, please contact Lynne Martin.
