2. Africa Continental Free Trade Agreement: Opportunity or Mirage?
by Duncan Bonnett Africa House
8th July 2019

3. Who are we?
Africa House represents the merger between two companies recognised as leaders in their fields: Whitehouse & Associates and Africa Project Access. Working exclusively in sub-Saharan Africa, we offer insight and access into the African trade and project environment through the provision of intelligence on projects and bespoke research on expansion opportunities in growing markets.
Our Services:
Africa House provides:
Projects: On-going research and intelligence on greenfield and brownfield projects to a dedicated subscriber base
Trade: Market and partner identification, export strategy development and commercial feasibility
Access: To the world’s fastest growing markets through a team that has worked in 30 countries across the continent over a period spanning 30 years
Insights: What is driving the continent and targeting regions of high opportunity going forward.

4. Some of the ways we can help you
Market Strategy development: Understanding where your markets are and how best to access these markets. This would include:
Market Identification and Analysis
Trade flow analysis – product and country specific
Ranking market attractiveness
Assessing competition
Understanding export market environments
Barriers to entry
Distribution and logistics
Partner identification
Independent and Lenders Market Assessments
A basket of subscriber services including identification of project opportunities and supply of project intelligence
Coordination (and inclusion if required) of in-market visits
Group visits to Development ‘Hotspots’
Sub-group Meetings on key topics for Africa House Subscribers

5. Regional Growth: More Nuanced
Growth for SSA at 7.4% to 2023 looks excellent after the downturn from 2014 to 2017;
Remove Big 3 laggards – SA, Nigeria and Angola, and it’s far better;
East Africa driving growth – regional economy has not contracted at all, whereas every other region has;
Largely because it’s not an extractives dependent region, with mining and oil & gas only now starting to become of some importance;
With SA and Nigeria excluded from regional data, East Africa emerges as the largest regional economy by 2018;
Southern Africa, even excluding SA, is the worst performing major region:
Angola, Mozambique, Zambia, DRC all hit by commodity price declines and Zimbabwe, eSwatini, Malawi a combination of commodity prices, drought and governance;
West Africa looks relatively good, with the regional GDP growing from US$600bn to over US$1 trillion – Nigeria to rebound in 2019 and beyond;
Central Africa is the smallest regional economy, but ticks along and is expected to maintain growth of around 3.5% a year – much of it driven by regional gateway Cameroon;
By 2023:
5 economies over US$100bn;
5 more over US$50bn;
Kenya, Ethiopia & Tanzania in top 6;
Region
2018
2019
2020
2021
2022
2023
Growth, '18-'23 (%)
Total
1,693
1,800
1,945
2,099
2,277
2,470 46
Excl Nigeria, SA & Angola
805
857
923
989
1,066
1,147 43
West
606
671
748
835
934
1,044 72
Southern
670
685
720
752
789
829 24
East
324
347
376
405
441
477 47
Central 94 97
102
107
113
119 27
SADC excl SA
293
299
317
332
351
372
Source: IMF, WEO Report, October 2018

6. Continuation of Infrastructure-led Growth:
Infrastructure spend in SSA will grow by 10% a year, exceeding US$180 billion by 2025;
Nigeria, South Africa dominate the market, but Ethiopia, Ghana, Kenya, Uganda, Mozambique, Tanzania positive;
Infrastructure spend in Nigeria to grow from $23bn in 2013 to $77bn in A more investor-friendly oil investment environment likely to boost this projection further. In SA, this figure may reach US$60bn;
Major increase in basic manufacturing spend underway in SSA. Annual spend on chemical, metals and fuels sector forecast to increase across seven major economies to $16bn, up from about $6bn in 2012.
Evident in the cement sector, where currently in excess of 75 greenfields and brownfields projects are underway, under consideration or recently completed. Investment in roofing products, plasterboard, paints, concrete products rising;
Investment in agri-processing from crops, livestock and milling to dairy, bakery, biscuits, processed meats and fish, beverages, pasta, edible oils and fats, increasing across Africa – brings in need for packaging, warehousing, cold storage, logistics etc;
SSA to increase spend on utilities, where an annual rate of 10.4% between now and 2025 is forecast;
Rail expected to need US$93bn in the foreseeable future, with power estimated at almost US$50bn a year required;
Oil and gas extraction activity and infrastructure spending are expected to vary across countries and regions. Extraction spending in sub-Saharan Africa is projected to increase at 8% annually over the next decade;
Angola, E-Guinea, Uganda, Nigeria, Congo-B, Ghana, São Tomé & Príncipe, Zambia all considering upgrades or new refineries to meet consumer demand – extra 3.4 bbl/d of refined fuels needed to by 2030 to satisfy additional consumers of refined;
Source: PWC Infrastructure Analysis, PWC Africa Oil and Gas Review, Africa House

7. Project Activity: Current and Future (US$ Millions)
South Africa, Mozambique and Nigeria have abundance of projects:
All three in weak economic position, however;
‘Energy Crescent’ from Botswana to Ethiopia providing excellent long-term opportunities;
Strong regional project focus in Southern Africa and East Africa – integration of infrastructure;
Ghana, Guinea, Cote d’Ivoire add to West Africa’s basket – seeing signs of more co-ordinated regional approach there too;
Central Africa largely revolves around Cameroon and regional projects;

8. Project Activity: Current and Future (US$ Mn)
From Africa House databases:
Over 3,300 projects added since January 2016;
Of these, roughly 63% have a declared value – others too early in project cycle;
Total value of projects is US$1.65 trillion
Oil & Gas, Transport and Power account for 75% of declared value of projects:
Sectors are critical to African industrial development and growth, as well as trade competitiveness;
Agriculture seeing a resurgence in interest:
Basic foods, export crops and value-added for domestic, regional consumption;
Mining saw many projects ‘parked’ due to commodity crisis – starting to pick up;
‘Urban Development’:
Construction, property, healthcare, water & sanitation, Integrated Urban development, accounts for 11% of the total – a definite growth area across the region;
Figures much higher, but many projects don’t have a declared value;

9. Extractive and Socio-industrial development nodes
Trans-Africa Highway: Dakar-Niamey
Djibouti-Addis-LAPSSET
Trans-Africa Highway: Lagos-Dakar
Northern
Population Centres
Diamonds
Gold
Bauxite
Cobalt
Copper
Iron Ore
Nickel
Palladium
Platinum
Tin
Coal
Oil & Gas
Graphite
Central
Dar es Salaam
NW Corridor
Lobito
Nacala
Trans-Cunene
Beira
Trans-Caprivi
Maputo
Trans-Kalahari
North-South
Cape-Kinshasa
Africa House analysis based on US Geological Survey statistics

10. Following Slides Unpack East Africa
Does not detract from opportunities in other regions:
Nigeria remains critical in Africa – despite forex issues, it is growing internally. Dangote cement revenues up 11.7% Y-o-Y in in Nigeria, other companies continue to expand – FMCG, ICT, infrastructure etc;
Angola similarly placed – expect recovery from mid/late 2019 in key consumer market;
Cote d’Ivoire key entry point for Francophone Africa – virtually untapped by SA companies;
Offers good access to other countries in West Africa, as does Senegal;
Cameroon offers similar opportunities into Central Africa
Ghana has similar value proposition – but not as a gateway to Nigeria!
Similar (but not as extensive or developed) regional infra-energy and extractive-led process underway in West Africa that will link Nigeria to Cote d’Ivoire through Benin, Togo, Ghana, and into the hinterland with Burkina Faso, Mali, Niger, Guinea, Liberia and Sierra Leone;
Based on roads, rail, power to integrate landlocked regions into ports and to unlock intra-regional trade;
Smaller process underway with Senegal, Gambia, Mali, Guinea-Bissau and Guinea which will complete the loop in broader West Africa;

11. East Africa in Context Ethiopia:
TUNISIA
MOROCCO
ALGERIA
Ethiopia:
Major growth node and key Horn of Africa economy;
Unlocking regional value chains in Djibouti, Eritrea, Somaliland;
LIBYA
WESTERN
EGYPT
SAHARA
MAURITANIA
MALI
NIGER
SUDAN
ERITREA
Uganda:
Oil is spurring development, both directly and in allied sectors – growth of +10% expected for next few years;
Regional hub for energy products – South Sudan, Rwanda gas, Eastern Congo oil;
Regional trade hub for E-DRC, S Sudan etc;
CHAD
SENEGAL
THE
GAMBIA
BURKINA
GUINEA
GUINEA
BISSAU
BENIN
NIGERIA
Berbera
COTE
TOGO
SOUTH
SIERRA
DTVOIRE
GHANA
CENTRAL
SUDAN
LEONE
AFRICAN
ETHIOPIA
CAMEROON
REPUBLIC
Rwanda, Burundi:
Smallest EAC markets, but:
Gas potential for Rwanda, nickel other minerals for Burundi;
Services economies – especially ICT in Rwanda;
Links into E. DRC and Zambia
LIBERIA
UGANDA
EQUATORIAL
REP OF
KENYA
GUINEA
THE
DEMOCRATIC
CONGO
REPUBLIC
GABON
OF THE CONGO
RWANDA
(ZAIRE)
BURUDI
ANGOLA
Zanzibar
Kenya:
Remains the business hub of East Africa;
Emerging oil producer?
Critical to unlocking hinterland development through ports;
Large and emerging consumer market;
TANZANIA
MALAWI
EAC:
EAC forms integral part of East African Energy and Infrastructure Hub Development
Kenya, Uganda, Tanzania, Rwanda and Burundi pushing forward quickly;
Infrastructure developments key to this – includes extensions into southern Sudan, eastern DRC and SADC region (Zambia);
ANGOLA
ZAMBIA
MOZAMBIQUE
MADAGASCAR
NAMIBIA
ZIMBABWE
Tanzania:
Major oil and gas potential;
Ongoing mining development;
Fast growing consumer base in key cities;
Key linkages to Rwanda, Burundi and SADC countries
BOTSWANA
SWAZILAND
LESOTHO
SOUTH
AFRICA

12. Regional Logistics Linkages: Current and Planned
Reopening of Assab and Massawa ports and roads a priority for Ethiopia: key trade routes for northern cities
$13bn being spent on Djibouti ports
New Port in Eritrea?
$442m DP World Port Concession at Berbera
China’s Belt and Road Initiative looking to open Central Africa to trade and investment – from Djibouti/Ethiopia
US$300m Berbera Road Corridor
Mogadishu – over 7,000 TEU per month
Hub
Development Node
Kisangani
Lamu – developing hub; alternative for trade for Ethiopia, S. Sudan, N. Uganda.
Mombasa – only major port in Kenya at present
Tanga – upgrade for oil exports from Uganda – industrial hub?
Oil Pipeline – Lake Albert to Tanga
Mtwara – fuel licence; gas, cement, mining
Mpulungu Port – linking SADC to C/E Africa – Pedicle Rd
Rail from Dar to Mwanza, Burundi, Rwanda expanded

13. Africa Continental Free Trade Agreement
Creates the world’s largest trade bloc, comprising 55 countries, with GDP of US$2.2 trillion in 2017, rising to between US$3 trillion and US$3.5 trillion by 2023 (IMF);
Bulk of countries have signed the agreement (52), 25 have actually ratified it, meaning it is now in force;
Eritrea only outstanding – Nigeria and Benin signed on 7th July;
Deadline for submission of tariff schedules was December 2018, but only likely in late 2019;
Tariff Concession portal established to allow countries to submit schedules;
July 2020 is when tariff reductions come into force – allows countries time to adapt;
Comprises tariff phase down over 5 years on 90% of goods (and over 10 years for least developed countries);
Also negotiation on sensitive/protected industries and services;

14. Africa Continental Free Trade Agreement
Global exports to Africa averaged US$560bn from 2011 to 2016 – this should average between US$580bn and US$600bn to 2023, depending on pace of recovery in key markets;
Currently only around 15% (US$85-100bn) of Africa’s total trade is intra-regional;
Successful – not guaranteed – implementation of AfCFTA, could see this rise by between US$16bn immediately (IMF) and up to US$50bn if NTBs are also addressed;
Requires commitment to eliminate smuggling of goods from 3rd party countries!
May see the opportunity to expand African manufacturing as well – both from domestic players as well as foreign entrants;
This is already underway in key basic sectors such as building materials, agri-industrial and light engineering;

15. AfCFTA Signatories Indian Ocean 24 Countries;
Algiers
Tunis
TUNISIA
Casablanca
Rabat
Oran
Constantine
Mediterranean Sea
MOROCCO
Marrakech
Bechar
Tripoli
Banghazi
Alexandria
Cairo
ALGERIA
El Aaiun
LIBYA
WESTERN
EGYPT
SAHARA
Al Jawt
Tamanrasset
Aswan
Red
MAURITANIA
MALI
Sea
Port
Nouakchott
NIGER
Faya-Largeau
SUDAN
Sudan
Nema
Lombouctou
ERITREA
Dakar
Agadez
CHAD
Khartoum
Asmara
Banjul
SENEGAL
THE
Bamako
Niamey
Zinder
GAMBIA
BURKINA
Al Fashir
DJIBOUTI
Bissau
N' Djamena
GUINEA
GUINEA
Ouagadougou
Kano
Maiduguri
Djibouti
BISSAU
BENIN
NIGERIA
Berbera
Conakry
Freetown
COTE
TOGO
SOUTH
Addis
DTVOIRE
Abuja
Porto-Novo
CENTRAL
Waw
SUDAN
Ababa
SIERRA
GHANA
LEONE
Lagos
AFRICAN
ETHIOPIA
Monrovia
Abidjan
Loma
CAMEROON
REPUBLIC
Juba
LIBERIA
Accra
Yaounde
Bangui
SOMALIA
Malabo
UGANDA
Sao Tome and Principe
EQUATORIAL
REP OF
Kisangani
Kampala
KENYA
Mogadishu
GUINEA
Libreville
THE
DEMOCRATIC
CONGO
REPUBLIC
GABON
Kigali
Nairobi
OF THE CONGO
Lake
Indian
RWANDA
Brazzaville
Victoria
BURUNDI
Bujumbura
Mombasa
24 Countries;
Combined GDP of US$1.17tn in 2019;
GDP will rise to US$1.6tn by 2024;
5 of the top 10 economies already signed up;
17 of Africa’s 40 largest cities – combined city population of 75m in them;
Pointe-Noire
Kinshasa
Kalemie
Lake
Ocean
ANGOLA
Kananga
Tanganyika
Zanzibar
TANZANIA
Dar es Salaam
Luanda
Mbeya
Malanje
MALAWI
Lake
ANGOLA
Nyasa
Lobito
Ndola
Lilongwe
ZAMBIA
Nacala
Namibe
Menongue
Lusaka
Harare
MOZAMBIQUE
MADAGASCAR
NAMIBIA
ZIMBABWE
Bulawayo
Beira
Antananarivo
With Nigeria:
Combined GDP of US$1.62tn in 2019;
GDP will rise to 2.37tn by 2024;
6 of top 10;
25 of Africa’s 40 largest cities – combined city population of 106m in them;
Windhoek
BOTSWANA
Walvis Bay
Toliara
Gaborone
Pretoria
Luderitz
Johannesburg
Maputo
Mbabane
Maseru
SWAZILAND
LESOTHO
Durban
Indian
SOUTH
AFRICA
Ocean
Cape Town
Port Elizabeth

16. South Africa’s Influence Illusion
South Africa’s share of regional markets is in decline;
We’re not the ‘Gateway to Africa’ in a major sense – but a key player in Southern Africa;
44% of SA’s Africa exports go to SACU;
The key developing regions in East and West Africa (including Cameroon in Central Africa) are largely out of our sphere of influence, bar pockets of success;
Only Kenya (3% in 2018) is key outside of SADC;
Central Africa – stretching from Angola (actually Southern Africa) to Sudan has little or no SA presence;
Ditto the Sahel;
BUT – we have instruments and influence through regional memberships, proximity, suitability of products and services and the ability to service markets flexibly;
Strong SA Influence
Partial Influence
Growth Areas

17. South Africa’s Influence Illusion
85% to 87% of SA exports destined for SADC region;
SA exported more by value to both Botswana and Namibia in 2018 than to the rest of Africa outside of SADC combined;
Nigeria accounts for 1/3 of SA exports to eSwatini!
AfCFTA could redress some of the imbalances in SA exports to North, East, Central and West Africa as scrapping duties give some comfort to our exporters;

18. Countries with Local Content Requirements/Preferential Procurement Laws
Petroleum (Local Content
and Local Participation) Regulation 2013
New Mining Code, 2015
2012 Petroleum Law
Law No of 16 July 2015
Proclamation to Promote Development of Mineral Resources
MAURITANIA
MALI
Petroleum Code
NIGER
SUDAN
ERITREA
CHAD
South Sudan Economic Empowerment
SENEGAL
Mines Act, 2014
THE
GAMBIA
BURKINA
DJIBOUTI
GUINEA
FASO
GUINEA
BISSAU
BENIN
NIGERIA
Berbera
Local Content Policy
COTE
TOGO
SOUTH
Enhancing National Participation in the Oil & Gas Industry in Uganda
SIERRA
DTVOIRE
GHANA
CENTRAL
SUDAN
ETHIOPIA
LEONE
AFRICAN
CAMEROON
REPUBLIC
Petroleum E&P Reform Law, 2014
LIBERIA
SOMALIA
UGANDA
EQUATORIAL
REP OF
DEMOCRATIC
KENYA
Oil & Gas Industry Content Development Act 2010,
GUINEA
THE
REPUBLIC
2014 draft National Energy Policy
CONGO
GABON
OF THE CONGO
RWANDA
Petroleum Code (Law no. 99/013 of December 22, 1999)
BURUDI
Petroleum Act, 2015
ANGOLA
Zanzibar
TANZANIA
National Content Regulation of Hydrocarbons Law
Zambia Mining Local Content Initiative
MALAWI
ANGOLA
2014 Hydrocarbons Law
ZAMBIA
2018 Revised Mining Code
MOZAMBIQUE
MADAGASCAR
Draft Petroleum Law
NAMIBIA
ZIMBABWE
BOTSWANA
The Petroleum Activities Law of 2004
SWAZILAND
Petroleum Law 18 August 2014; Mining Law 2014
LESOTHO
SOUTH
Section 14 of the Petroleum Act
AFRICA
Indigenisation Law (Under review)
Localisation, Reservation & Public Procurement Policy
Preferential Procurement Act

19. Looking Forward
Opening up of Southern and East Africa, away from SA-axis, will see shift away from SA supply:
You have to ‘fly the flag’ – if your product doesn’t have a presence, it won’t sell;
‘Local’ Supply – increasing investment in local manufacture of basic building inputs as well as other products – this is increasingly happening in key markets;
Not only goods, but services as well – architects, designers, contractors;
Means procurement channels are changing as well – more focus on Middle East and Asia as suppliers of goods and services;
Influence of China:
Very strong in most industries:
From construction of infrastructure to building materials and FMCG products, Chinese goods becoming dominant;

20. Looking Forward Other suppliers have tapped into this
Asian rivals are also developing markets that did not exist before;
Indian companies growing their influence in sectors such as power, automotive, clothing, FMCG and household goods;
Other influence is growing;
Increasing number of Brazilian, Turkish, Moroccan, Pakistani, Kenyan, Nigerian, Egyptian etc companies investing in and exporting to Sub-Saharan Africa in all sectors;
Morocco took a bilateral delegation of 150 companies to Rwanda last year and Zambia and Morocco have signed 19 governmental and economic partnership agreements. Morocco has applied to join ECOWAS and is pushing for a single currency for the region;
Very noticeable on recent visits that manufacturers and service providers in key sub-regional markets such as Kenya, Zambia, Nigeria, Cameroon, Cote d’Ivoire and Ghana are increasing their regional footprints – often with better knowledge than their SA competitors;

21. Can we Export our Way out of Trouble?
In short? No, if we’re looking at traditional method of ex-SA into immediate regional markets;
The landscape – from projects to trade has matured in recent years and will continue to evolve;
Growing insistence of government on local procurement, skills is forcing the hand of project developers;
Increasingly, global players making direct entry into key markets:
This has slowed slightly with lower growth projections for the region, but remains a long-term trend;
This is across many industries, from basic building materials, to other construction and industrial products, to food and beverages, luxury goods and other products;
Also happening in the services sector, with increasing numbers of architects, designers, engineering companies, law firms and others either investing directly or looking for strategic partnerships in key markets;
SA companies (in our experience) are slow off the mark, but getting there:
This applies to both local companies as well as SA-based MNCs;
Increasingly, a presence will be needed in key markets to sustain exports, or even local assembly/manufacture operations;
Increasing domestic capacity in many basic industries is reducing import dependency;
Bear in mind the growing long-term prospects offered by key growth nodes, the rapid pace of change, as well as the increasing independence from SA-focus as countries evolve and integrate into the global economy;

22. Thank You!