Sub-Saharan Africa: an emerging economic power?

The African political and economic landscape has made this continent the perfect destination for exports and foreign investment by Spanish companies. This is the view of the Exporters and Investors Club, which this Wednesday presented, through a virtual seminar, the report "Spanish business investment in Sub-Saharan Africa", prepared by a group of researchers from the Autonomous University of Madrid led by Professor José María Mella, who is part of the EU's Jean Monet network for Africa, the Mediterranean and Europe.

Professor Mella began by explaining what Plan Africa III consists of, a project approved in 2019 by the Spanish government to mobilise the necessary resources to facilitate a rapprochement between our societies. This plan aims to concentrate efforts on three "anchor" countries (Nigeria, South Africa and Ethiopia) which "due to their size and regional prominence can act as exporters of stability to their neighbours, absorbing intra-African migratory flows in an orderly fashion", as indicated by the Ministry of Foreign Affairs in the official document that defines the principles and objectives of this plan. Along with these three "anchor" countries, this initiative selects seven other "partnership countries", nations with which it aims to further strengthen its ties, including Angola, Côte d'Ivoire, Ghana, Kenya, Mozambique, Senegal and Tanzania. 

The professor of the Autonomous University has emphasized the characteristics shared by many of the countries that are part of the Africa Plan. These nations are characterized, among other things, by "their demographic dynamics, a low level of production/income, a very diverse degree of trade openness, insufficient national savings (current account deficit), low external debt, low investment and a very volatile exchange rate". This scenario means that the trade of these countries is mainly with a small number of countries, among which the Asian nations stand out. In terms of foreign direct investment (FDI), Sub-Saharan Africa has, in the words of Mella, "a residual role in receiving FDI flows worldwide, although with increasing rates in recent years". 

During his speech, Mella also spoke about the importance of the business environment when setting up production plants or drawing up production costs or analysing competitiveness. In this sense, he wanted to highlight the Moroccan experience. According to the Professor of the Autonomous University, some lessons can be drawn from this experience such as that "they are complex markets due to regulations and legal frameworks", that it is advisable to "avoid litigation or legal disputes" or that "it is necessary to know the customs of the country and maintain personal contact with the counterparts". 

After making this analysis, Mella has begun to name the priority sectors for investment, highlighting agriculture and agrifood, an industry that is gaining more and more weight in this region. The main risks and barriers to entry are, according to the analysts who have written this report, "excessive bureaucracy, administrative slowness and procedural complexity or poor infrastructure of all kinds, which complicate logistics operations". To conclude his speech, Mella highlighted the main investment opportunities for Spanish companies in this region and gave a series of recommendations for both public and private bodies, stressing the need for ongoing collaboration with other institutions such as the European Commission or the AECID.

The presentation of this report was also attended by José Matsinha, Ambassador of the Republic of Mozambique in Spain and Dean of the African Ambassadors in our country. The stock of Spanish FDI accumulated in the area is less than 1900 million euros, that is, 0.4% of total Spanish investment in the world. "We cannot talk about Africa without first putting it into context".  With these words, the ambassador of Mozambique began his speech; a speech in which he spoke about how these investments are part of the Agenda 2063 approved at the African Union summit in January 2013. Under the name "The Africa we want", this plan aims to make Africa an emerging power at world level. 

In this speech, Matsinha highlighted the role played by the so-called African Free Trade Agreement, a trade agreement between 44 countries of the African Union, which aims to create a single market. However, all these advances have been relegated to the background by the appearance of a virus that has stopped the world. That is why the question to be asked now - the ambassador warns - is what are the current prospects for sub-Saharan Africa after the coronavirus pandemic? 

The economic situation has worsened in the region due to the temporary closure of some companies to mitigate the effects of COVID-19. "The business community in this region is dealing with an unprecedented crisis and needs urgent assistance," he insisted. The president of the Exporters and Investors Club, Antonio Bonet, has highlighted the importance of the aid that the countries of this region will receive from various multilateral organizations. "This aid will facilitate the process of recovery from this pandemic in these nations and will also create concrete investment opportunities for Spanish companies". 

The third part of this seminar has been led by a dialogue between the president of Incatema Consulting and Engineering, Joaquin Quiñonero and Laura Muñoz Espiago, Business Area Manager of Africa of the company Satec. This debate was moderated by Salim Flaja, coordinator of the Africa working group of the Exporters and Investors Club.  This organization considers that "the situation in Spain and a good part of the European countries, in general, is far from the one acquired in the last years by other Asian countries, especially China". The Asian nation has become one of the most important partners of these countries, both as a supplier of products and as a destination for their sales.

"Our history in Africa is a success story", stressed Laura Muñoz, stressing that we must leave behind the current "lack of knowledge of the opportunities that this continent can offer us", a continent that is geographically much closer to the Peninsula than Asia or Latin America. "We always throw more to other regions perhaps because of this cultural approach. There is one aspect that seems fundamental to us, and that is the time proximity that makes it easier for us to work with African companies". "For us, developing our business activity in Morocco has allowed us to extrapolate our experiences in this country to other neighbouring countries", he concluded. 

"There are a number of barriers that make it difficult for Spanish investment to be present in this region," according to Quiñonero. "Firstly, the issue of communications, as it is very complicated to travel to Sub-Saharan Africa without having to stop over in one or another country". Secondly, he stressed that "language plays a fundamental role". The third aspect has to do with "the distrust of the Spanish businessman towards Africa as a consequence of this lack of knowledge of what is happening in these countries". "I believe that Africa has enormous potential and I encourage all entrepreneurs to try to enter this market," he said.

To put the finishing touches to this seminar on business and investment in Sub-Saharan Africa, the Director General for Africa of the Ministry of Foreign Affairs, European Union and Cooperation, Raimundo Robredo, has taken an x-ray of the two realities that coexist in Africa at the moment, emphasising the fact that, on the one hand, there is the mistaken image of Africa of poverty and conflict and, on the other, a continent full of opportunities that are waiting to be discovered. "These two realities live and struggle side by side".  Robredo considers that the demographic growth of the African continent during the next few years is a matter of great relevance for Spain, since it will affect us directly. 

"Spain's policy towards Africa consists of reacting to what we consider to be a threat", he stressed. "We have a foreign policy that pays attention to Africa only when Africa causes it some problem.  This policy is successful in that it achieves the objectives it sets, but perhaps it is not ambitious enough. I think we have to be a little more forward-looking, that is, think a little more long-term and look at both threats and opportunities," he said. 

"There are many opportunities in Africa, but this is not the perception we have," he said before explaining that we also do not have the necessary instruments to promote the presence of our companies in Africa. The Africa Plan aims to carry out a series of concrete actions that are oriented towards four strategic objectives. The first of these aims to promote peace and security. Secondly, this plan is also committed to promoting sustainable development driven by inclusive economic growth that generates employment and opportunities. This document also establishes as purposes the strengthening of institutions, aimed at the consolidation of democracy and human rights and support for "orderly, regular and safe" mobility.  "Africa is a continent of opportunity that we can still enter," Robredo concluded.

The Spanish Exporters and Investors Club defends the position that the economic projections of this region continue to be attractive in the medium and long term, despite the negative impact of the Covid-19. In this sense, throughout this webinar they have stressed the need to "strengthen the collaboration between AECID, Cofides and the European Commission and to seek permanent links with African administrations".