3rd EU-Africa Business Forum September 28-29, 2009 in Nairobi “Africa and Europe: On the road to new win-win partnerships”

What is a Win-Win Partnership? In colloquial speech, a win-win situation often refers to situation where one benefits, not necessarily through someone else's loss i.e where both parties win In the context of group-dynamic games, win- win games are also called 'cooperative games', 'new games' or 'games without losers‘group-dynamic games In mathematical game theory such games are also called non-zero-sum games.game theorynon-zero-sum games

Business Forum Being an integral part of the Joint EU-Africa Strategy – “will be an unrivalled opportunity for businesses to share their views and to network with other businesses and policy makers” However the African Business Community was not an integral part of the process that developed the Africa – EU strategy and the true African business community (mainly SMEs) is not represented in such a forum

Trade, Investment and economic growth Trade and Investment are the driving forces of rapid economic growth, economic development and poverty reduction. In Africa Trade and Investment is hampered mainly by the high costs of doing business there is no level playing field for the African business community to trade with the EU business community. The challenges are mainly in: – Infrastructure especially transport and energy – Production (productive capacities and technological capabilities) – Human skills This provides win – win situation for the EU-Africa Partnership (We all win)

Role of Private Sector The business sector should play a leading role as an engine of economic growth and prosperity This requires a bottom – up partnership rather than a top-bottom partnership, at the moment the private sector in Africa is not fully engaged There is a need of a Private – Public Partnership and dialogue from bottom-up not from top- bottom Conditions for Private Sector Growth

Global macro environment Domestic macro environment Physical and social infrastructure Rule of law Level playing field Access to financing Access to skills and knowledge Private sector growth Pillars of entrepreneurship Foundations for the private sector Conditions for Private Sector Growth

Private sector in Africa Multinational Companies – 10% -20% SMEs (including micro and informal sector) – 80% - 90% The Linkage between the two is lacking In most cases the SMEs are crowded out because they cannot compete SMEs contribute less in Economic development in LDCs compared to DC

Contribution of SMEs in GDP

Contribution of SMEs to GDP growth While 80%-90% of the Private Sector in Low income countries are SMEs the contribution of SMEs to GDP is only 16% compared to 51% and 39% in High Income and Middle Income countries respectively

Why? This is principally because they trade in unprocessed and non- manufactured low quality products and primary commodities which are exposed to poor terms of trade, There is a consensus that Africa MUST add value to and process its Raw Materials and thus trade in high quality processed products if it has to trade itself out of poverty A Win-Win Partnership should be looking at how to contribute towards the transformation of African economies from Factor Driven to Technological and Innovation Driven economies trading in high quality processed and value added products and services, Returns to investments are high and with African Trade Insurance both Commercial and Political Risks are mitigated

SMEs mainly trade in unprocessed primary commodities

COMESA's Trade with EU 2001 to 2008 value US$ Millions (Excludes oil and oil products) Flow Exports 4,171 5,486. 5,907 6,617 6,280 7,575 8,579 11,988. Re-Exports Total Exports 4, ,513. 6,086. 6,797. 6,594. 7,796. 8, ,592. Imports 7, ,533 11, ,076 16,238 17,698 21,018 32,083 Trade Balance (3,391) (7,020) (5,161) (6,279) (9,643) (9,902) (12,079) (19,490)

Semi or unprocessed COMESA Exports to EU among the 20 top exports No. HS200 2Product DescriptionValue Coffee (excl. roasted and decaffeinated) Fresh cut flowers and flower buds, for bouquets or for ornamental purposes Prepared or preserved tunas, skipjack and Atlantic bonito, whole or in pieces (excl. minced) Non-industrial diamonds unworked or simply sawn, cleaved or bruted Fresh or chilled vegetables (excl. potatoes, tomatoes) Raw cane sugar (excl. added flavouring or colouring) Tobacco, unstemmed/unstripped Black fermented tea and partly fermented tea, whether or not flavoured, in immediate packings of > 3 kg Tobacco, partly or wholly stemmed/stripped, otherwise unmanufactured Frozen shrimps and prawns, whether in shell or not, incl. shrimps and prawns in shell Vegetables, uncooked or cooked by steaming or by boiling in water, frozen

EU-Africa Trade (Excluding Oil) As the above tables show – There is an imbalance in trade between COMESA and EU trade – COMESA top exports to EU are mainly un processed and primary commodities

Recommendations A win - win partnership should focus on reducing the cost of doing business and enhancing competitiveness in Africa so as to level the playing field for the African Business community and thus the private sector to grow. This means investment in: – Infrastructure, roads and energy – In technology for value addition and processing such as packaging and branding – In industrial parks – In centres of excellence that build productive capacities and technological capabilities – In R&D for innovation – In human capacity

Recommendations Win-Win partnership will require Investment In People – IIP African business challenges will require “win-win” strategies that provide competitive advantage through community investment. Need to develop Win-win business strategies that are bottom-up and boost the bottom line and benefit low-income communities and adress competitiveness

Continuing