Why do Business in Africa? (Degree)

State of the African Economy. Doing Business in Africa (Bachelor's Degree in Inter-African Business e-learning)

Why do Business in Africa?

“The future of humanity is becoming more African” (UNICEF)

1. In thirty-five years, 25% of the world's population will be African
2. Africa will lead the World population growth over the next fifty years
3. 50% of the African population will live in a city (2040)
4. Population of Nigeria in 2100: 1 billion Nigerians.
5. African demographic dividend

African Economy

1. Nigeria is the largest African economy followed by South Africa, Egypt, Algeria, Angola, Morocco, Sudan, Kenya, Ethiopia...
2. The leading African economic sectors are agriculture (25% of GDP) and services
3. African manufacturing sector: only 10% of Africa's GDP
4. The African women are one of the pillars of Africa's economic development (70 percent of the agricultural labour force)
5. e African Mobile Revolution
6. Africa: the emerging continent or next “frontier market”?
   1. Nigeria: the world's first frontier market.

Intra-African Trade

The African Union vision: to increase the intra-African trade up to 25% (currently 10%) through regional integration. The action plan to stimulate the intra-African trade.

The ultimate objective is to create the African common market “The African Continental Free Trade Area (CFTA)” (one billion people, a combined GDP of $ 1.2 trillion) made up of fifty-four African countries.

1. Key role of the Regional Economic Communities (RECs)
2. African products have an “EXW” competitive cost, but the distribution process in Africa (transport and logistics, handling, customs, stockage...) increases the final price generating a loss of competitiveness.
3. Too many barriers to intra-African trade (diversification of exports, lack of infrastructures, trade barriers, cross-border trade, customs...)
4. African Development Bank estimates that the cost of transporting a container from Durban (South Africa) to Lusaka (Zambia) - 1,633 kilometres is 8,000 dollars while costing only 1,800 from Durban to Japan
5. One - stop border posts can help to reduce the custom's clearance times on African borders. For example, on the border between Uganda and Kenya (Malaba), the border crossing has been reduced from 24 hours (2011) to 4 hours (2012).
6. Importance of the African Value Chains
7. Delays in the African customs: twelve days (in Central Asia: six days)
8. Financial systems in Africa are limited and not sufficiently regionally integrated, resulting in high transaction costs and high levels of risk.
   1. One of the pillars of the African financial system is the cross-border banking sector.

African International Trade

1. Nearly 80% of the African exports are exported outside Africa
2. Africa, the factory of the world?
3. Asia is Africa's third largest export market (26% of total African international trade). The main exports are commodities.
4. China is the first export market of Africa (50% of total African exports: fuel and natural resources). China is the first investor in Africa.
   India: 25% of total exports of African products, Brazil 13%, South Africa 11% and Russia 1%
5. Africa-BRICS (Brazil, Russia, India, China, South Africa) trade: 500 billion dollars
6. Main exported products by the BRICS countries to Africa are manufactured products (mainly from China) and food products (mainly from Brazil)

Landlocked African Countries

Fifteen African countries do not have access to the sea: Botswana, Burkina Faso, Burundi, Chad, Central African Republic, Ethiopia, Lesotho, Malawi, Mali, Niger, Rwanda, Swaziland, Uganda, Zambia and Zimbabwe.

1. High logistical costs (up to 77%)
2. Solution: African transport corridors
3. Africa needs 93 billion dollars (15% of Africa's GDP) in infrastructure investments.

Licenciatura en negocios interafricanos Licence en affaires interafricaines Licenciatura em Negócios Interafricanos

(c) EENI- Business School & Hispano-African University of International Business