Business News in Africa – 2018 Edition
Air travel soon to be liberalized in Africa
Government restrictions on visas and air routes are known to hinder the chance to travel of at least 4 million of Africans. According to the World Bank, this also leads to a loss of around $800 million for African airlines.
In late January, the African Union (AU) reiterated their wish to improve air connectivity in Africa and use air transportation as an engine for economic growth, job creation and integration. African nations hope to imitate markets like Europe and Latin America, which would encourage cross-border investment and innovation.
So far, 21 countries, with more than 670 million potential passengers, have committed to the plan. 15 carriers, which account for more than 70% of intra-African air travel, have also signed up for the common market.
Urban Africa facing a shocking rise in obesity
With the rapid urbanization of certain African regions, people’s lifestyle has rapidly changed. Decreased physical activity, higher intake of high caloric fast foods and sugar sweetened beverages are progressively touching more and more Africans.
Scientists project that obesity in Africa will increase by 50% by 2030 and 2060 by 2050. Obesity is a serious public health problem because it significantly increases the risk of chronic diseases such as cardiovascular disease, type-2 diabetes, hypertension, coronary heart diseases as well as certain cancers. It also puts considerable strain on healthcare and social resources.
In the latest survey Egypt has the highest prevalence of obesity by far. Two out of every five Egyptians (39%) are obese, followed by Ghana at 22%.
African leaders have created the world’s largest free trade area
African leaders have just signed a framework establishing the African Continental Free Trade Area, the largest free trade agreement since the creation of the World Trade Organization. The free trade area aims to create a single market for goods and services in Africa.
The market size is expected to include 1.7 billion people with over $6.7 trillion of cumulative consumer and business spending if all African countries join in. The ultimate strategy behind this move would be to trigger a virtuous cycle of more intra African trade, which in turn would shape the African economy into a higher productivity and skills intensive workforce.
Currently, it is a work in process, with 22 countries yet to ratify the agreement. It is expected that the ratification will be complete by January 2019.
More Africans now have access to electricity – 600 million are still in the dark
According to the World Bank, around 600 million people lack access to electricity in Africa. From 2014 to 2016 however, an impressive additional 76 million people are now connected to an electricity source.
Yet, those 76 million new connections only slightly outpace the population growth of 54.4 million people in those 2 years. 60% of the newly connected population were in rural areas, which makes it even more challenging. Pay-as-you-go solar has attracted $750 million in investment over the past five years, which has allowed the spreading of mini power grids across the continent.
Universal electrification remains however hard and expensive. Mini-grids that offer a grid-like service still cost between $500 and $1500 to connect each household. Electrification in a continent where over 60% of the population still live in rural areas is even harder. Still, universal electrification is the seventh of the Sustainable Development Goals that the global community has committed to achieve by 2030.
Africa relaxes VISA rules for China
Chinese travelers are known to be the top tourism spenders – in 2017, reports suggest almost $260 billion of spending related to travelling alone. Recently, visa rules for China have been relaxed and promotional initiatives have been setup to appeal to Chinese tourists.
The Industrial and Commercial Bank of China launched a joint loyalty program with Kenya’s Stanbic Bank, aiming to create incentives for travel, shopping, and leisure to tourists visiting the two nations. This program rewarded its cardholders by offering a range of discounts and special offers from merchants across the travel, hospitality and lifestyle sectors. This year, Kenya also launched a marketing campaign to target China, hoping to boost the over 53,000 Chinese visitors who already came to the country last year.
African governments, businesses, and tour agencies are eager to tap into this sector and introduce localized tourism products. And indeed, tourism is a powerful vehicle for economic growth: As of 2014, tourism contributed to 8.5% of Africa’s gross domestic product, according to the United Nations trade arm, generating 7.1% of all jobs.
WhatsApp is getting set to be Africa’s biggest payments and ad platform
WhatsApp’s competitive advantage is in emerging markets, where its service almost always works, regardless of internet speed or available bandwidth. It’s the world’s No.1 messaging service, thanks to users from Latin America to Africa and most of Asia outside China.
WhatsApp is documenting business-user behavior in order to optimize for the largest use cases and is particularly focused on the big opportunities in payments and discovery. There could a huge reward for over a billion people to move money around globally and could easily dominate in sub Saharan Africa where it is the default social media platform.
While there’s no guarantee WhatsApp will be Africa’s biggest payments player in the long term, if it is able to navigate the regulatory environment in larger African economies like South Africa, Nigeria and Kenya it would have a significant head start over local fintech startups still trying to convince both partners and customers to use their services.
Madagascar has faster internet than UK, France and Canada
Madagascar, one of world’s poorest countries, has the fastest broadband internet speed in Africa and has average speeds much faster than some of the world’s wealthiest nations. At 24.9 megabits per second, Madagascar’s broadband speed is more than twice the global average. Not only does this mean the African island nation has the fastest internet speed on the continent, but it places 22nd in the world, out-pacing Canada, France, and the UK.
But despite what seems a technological advantage, Madagascar’s high-speed internet barely serves its population. Just 13% of its 25 million population has access to electricity and only 2.1% of the population has access to the internet. There are only 2.75 IP addresses per 1,000 people compared to a global average of 558 per person.
Despite its speed, internet connectivity isn’t always stable in Madagascar. In February 2017 a cable broke down. Complete cable repairs took much longer than expected, a total of 15 days. In the meantime, clients were compromised, and it caused significant disruption to the economy.
Space programs will boost development in Africa
Rockets and space are increasingly important to Africa, where more countries have been partnering to launch or are launching their own satellites. Companies like SpaceX are now launching much smaller satellites than previously in history, and at a much smaller cost. The advances in technology mean more developing countries can use satellites to collect valuable data.
More and more African governments and institutions are supporting initiatives to retrieve and use satellite data. The African Union’s science and technology department is partnering with the European Commission’s Copernicus program to enable African scientists and institutions to receive satellite data for free.
Using satellites and the data gathered from them could actually influence the development of the African economy. Recently, an initiative called the SAT4Farm launched in Ghana to use digital technology and satellite imagery to create individual farm development plans that farmers can access from their mobile phones. The idea is to use the data to offer guidance on climate adaptation.
Airbnb booming in Africa
Since launching on the continent, the travel startup has notched up over 130,000 listings which have seen over 3.5 million guest arrivals. However, around half of those guests arrived in the past year alone. Airbnb’s growth on the continent is highlighted by one stat: Nigeria, Ghana and Mozambique are all among Airbnb’s eight fastest growing markets globally.
Airbnb’s disruption of tourism also translates into real economic power for its hosts: African Airbnb hosts have earned over $400 million in income as hosts in South Africa and Morocco—two of the most popular destinations—average over $1,000 annually.
While it has undoubtedly been used by foreign tourists visiting and discovering the continent, Airbnb has also proven important for Africans traveling within the continent.
Mobile money transactions in Somalia are overtaking Kenya
Latest reports from the World Bank show that Somalia has one of the most active mobile money markets in the world. This growth has outpaced most other African countries and has even surpassed the use of cash in Somalia.
Initially, mobile money started as a simple exchange of airtime credit between users in Somalia. Mobile network operators seized the opportunity and formalized mobile money services, which was quickly adopted as a convenient and safe way to make transactions and store money. Also, almost 60% of Somalia’s population is nomadic – they move around the country to find grazing and water for their livestock, which makes mobile money a convenient way to trade.
Somalia lacks a strong formal banking system. Only about 15% of the population has a bank account. Mobile money has helped to expand financial inclusion, and latest household surveys suggest about 73% of Somalis above the age of 16 use mobile money services at least once a month.
Ethiopia overtakes Dubai
This year, Ethiopia has emerged as a destination and a transfer hub for long-haul travel to sub-Saharan Africa. Recent data from travel intelligence agency ForwardKeys point out that Addis Ababa Bole International Airport has overtaken Dubai as the leading gateway in the region. Travel bookings between November 2018 and January 2019 are set to grow over 40% based on a year on year growth.
All of this was made possible through major political reforms and relaxed visa rules, backed by strategic investments and partnerships. As part of new reforms, Ethiopia also started issuing e-visas to all visitors in June, and in November, introduced visa-on-arrival for all African visitors. A case in point is how liberalized visa applications in Morocco and Tunisia attracted significant Chinese tourists in the last few years, bringing the world’s top tourism spenders to African shores.
There has also been hints that Ethiopian Airlines should be co-owned by African governments as the continent’s skies are opening up. Ethiopian Airlines are also planning on a massive expansion plan – raising the annual passenger capacity from 7 million to 22 million, at the cost of $345 million with the help of China.
Top 5 fastest growing economies are all in Africa
2018 has shown promise for the Africa. The world’s top 5 growing economies are all from the African continent. With a skyrocketing population made up of predominantly younger people, Africa seems to have the perfect recipe to move to the next level. The World Bank’s projections for the continent: regional GDP growth of 3.2% (compared to 2.4% last year) is expected this year and an even greater increase of 3.5% is forecasted for 2019.
The world economy is also in better shape, with faster growth and buoyant capital markets. And with more than $100 trillion in assets managed by institutional investors and commercial banks globally and searching for good returns, African countries have an array of options, beyond domestic resources and foreign aid, to support their investments.
Economic diversification is thus key to solving the continent’s problems, especially in the context of a challenging demographic structure. A priority for African governments is to encourage a shift toward labor-absorbing growth paths. A second is to invest in human capital, particularly in the entrepreneurial skills of youth, to facilitate the transition to higher-productivity modern sectors.
Read the full breakdown about the Top 5 fastest growing economies in Africa here.