Join the winning team - COMESA as a business arena

COMESA 2018 Special Report, By Sandra Uwera*

COMESA 2018 Special Report
The biggest investment and business opportunities for Africa lay in traditional sources, especially from the trade and export of raw and non-value-added commodities such as crude oil, timber, gold, coal, cocoa, tea, coffee, leather and several others.

During a conversation with a software engineer, I was drawn to this interesting remark, “If you want to develop the right solution, first understand your market – and then customise it.” I believe this can be said for a businessman looking to invest or go into a joint venture partnership in the African continent. Here are some little morsels of truth that you will need to guide your ultimately successful journey into the African business market and COMESA in particular.

According to Hans Rolin's book ‘Factfulness’, there should be a re-defined approach to the terms “developing world” versus “developed world”- especially when such terms, may undesirably categorise certain economies as rich versus poor, or “the West” versus “the rest.” Rolin goes on to show how economies were analysed with various indicators that can give a misconception of the reality on the ground. It is this that has led to dramatic titles such as “Africa, the Dark Continent” to “Africa Rising”. These rather interesting descriptions of the continent have played for and against our markets. One can assume that the initial idea was to draw attention to Africa’s growth pattern into one of the fastest emerging economies – World Bank report shows that six of the world’s ten fastest growing economies are in the continent. One can also assume that the once uncivilised, poverty-stricken, unapprised cluster of countries are gradually upgrading to become what “the West” deems as “successful”. Such terms have, on many occasions, altered the reality on the ground.

Africa is rich. Africa’s resources feed more than half of the world’s production inputs – ranging from agro-industry to manufacturing, minerals, and infrastructure. Today, we see China, US, Russia, and the EU seeking various trade agreements with the countries so as to position their share in the African Market. Africa has land, natural resources, affordable labour and a huge market rolled up into one delicious sandwich. Africa is also made up of cultural diversity, tastes, and preferences from 55 member states. This opens the floor for innovations that speak to the needs of over 1.2 billion people, representing a huge market for what the continent offers.

It is clear that Africa today opens new ground for investment and business opportunities. If you haven’t set your eye on this market, you might be at the short end of the investment stick. If you do have your eye on the ball, here are some tidbits for you to make an informed decision on doing business in COMESA.

A snapshot of the region – invest, partner, trade

In Africa, one size does not fit all. Each country is diverse and unusually different from the other from the other when it comes to culture, geography and natural resources available. COMESA’s investment portfolio is distributed within nine economic sectors which have a combined value of $78 billion. These are in agriculture, infrastructure, energy, general manufacturing, construction and real estate, tourism, services, ICT, and mining. Depending on the regional/country make-up, each sector offers investment opportunities that range from housing to commercial construction, extractive industries, hotel and hospitality industry development, steel milling, leather production, pharmaceutical and tire manufacturing, power generation, and the common vision of improving our transport networks across Africa through road, rail, and maritime infrastructure.

For decades, the biggest investment and business opportunities for Africa lay in traditional sources, especially from the trade and export of raw and non-value-added commodities such as crude oil, timber, gold, coal, cocoa, tea, coffee, leather and several others. In fact, to-date, Africa’s most viable and safe sectors of investment are manufacturing, extractive industries, agriculture, and tourism. However, with the rise of a vibrant manufacturing sector, and the common agenda to bring more value-added products to sell within the regional and global markets, the region has faced some key challenges in improving distribution, cross-border transactions and meeting market demands. These range from technological limitations, logistical and transport and energy costs, to varying regulatory frameworks across regional markets. As a businessman, these challenges, in turn, offer unconventional business opportunities.

As a potential entrant into the market, you are looking at a huge market share of about 504 million consumers within 19 countries alone, capturing at least a third of the continent. Total trade in the COMESA region was about $235 billion as of 2016, of which imports were $165 billion and exports $71 billion in value. Contrary to the popular view of political instability and security concerns, the African dynamics of solidarity have allowed for common approaches and absorption of challenges through the goodwill of countries – showing a strong level of patriotism and brotherhood amongst neighbouring countries. As we speak, we have eight regional economic blocs that are aligning trade facilitation instruments, tariffs and other means of improving freer movement of goods and services across the region. At a continental level, we have seen the signing of the Continental Free Trade Area signed by 44 African states, and we are commencing the ratification of the CFTA by 22 countries to make it effective. This is a strong indicator that the current 16 percent of intra-trade will significantly increase once we see barriers to business in the region lifted, and improved consumer confidence in our own goods.

Know your consumer

There has been a great emphasis on Africa’s middle class. According to Euromonitor, research shows that countries like Egypt forecast an increase from 3 percent to 5 percent by 2030, while Kenya forecast the highest growth from $7500 to $10,000-15,000 between 2017- 2030 COMESA’s buying power as of 2016 was up to $684 billion. What does this mean? That purchasing power is on the rise. However, this also means that the African consumer is more sophisticated, not only driven by price and quality but also time and consistency and availability of the product and service. It is for this reason that setting up a shop in the region is a more viable business investment for you in the long run. You get to have a first mover advantage in the second biggest consumer market, Asia being the first.

Secondly, competition in the African market is good, which in turn means that the laws of supply and demand work very well in this market. The region has seen a diversity of products (some substandard) flooding the market. In fact, countries have now put in place strong measures to curb substandard, illicit goods from flooding African markets to the detriment of genuine manufacturers who have invested in the region. Governments are cognisant of the interests of business and industry. COMESA Anti-Illicit Trade Framework and the COMESA Seed Label Tool are some of the programs which have been introduced to curb illicit trade in the COMESA region.

To trade? Crossing the borders

Now I know you will ask, What about the infrastructure? Africa is known for the highest transport and logistical costs, with limited diversified transport networks for me to get my goods to market. So why set up shop in Africa if some of the operational risks are high? Well, the regional trade facilitation agenda can pick that thorn out of your flesh.

COMESA provides an array of instruments that are established to ensure seamless trans boundary trade along the corridors. These instruments are the Yellow Card Third Party Motor Vehicle Insurance, COMESA Carrier License for road freight operators, Regional Customs Bond Guarantee System, COMESA Harmonised Axle Load, Gross Vehicle Mass Limits which includes the COMESA Certificate of Overload Control, COMESA Customs Declaration Document, COMESA Virtual Trade Facilitation System (CVTFS), Simplified Trade Regime (STR), One-Stop-Border Post (OSBP) in Chirundu, Zambia and Zimbabwe, and trade and transit facilities to ensure freedom of transit.

However, as the Business Council, we recognise that non-tariff barriers, cumbersome administrative procedures, lack of clear documentation and requirements for moving goods from one country to another, costly pre-verification and post verification procedures and protectionist tariffs are some of the key barriers to business. As such, we work closely with industrial players in the 11 business sectors to address these challenges to the highest levels of decision making in COMESA. The strong will and understanding from governments on the important role that private sector plays to shape and steer the African economy has put business interests on the forefront of shaping the economic agenda of COMESA and Africa as a whole.

Unconventional business opportunities

The region offers opportunities in mobile financial services. One of the key solutions to respond to limited financial access to the population has been affordable mobile payment systems that have penetrated even the most rural parts of Africa. Innovative solutions to respond to the unbanked population in the region has opened the floor to digital services industries to think harder about channels that can facilitate cross-border (national and regional) transactions with ease through seamless payment gateways. Terms such as ‘cashless’ and ‘cash light’ are buzzing in the ears of enterprises today. In the same breath, governments are putting in place regional regulatory frameworks that will not stifle innovation but will clearly respond to the needs of the banks, telecommunication industries, vendors, and consumers.

Go local sourcing

My personal favourite is the strengthening of local supply chains in the region. Africa has slowly evolved to appreciate its own products and services, given the strong injection of technical and financial support from public-private partnerships to improve standard compliance of goods and services that are locally grown, manufactured or catered for. Going local is the new cool, as they say.

This also applies to the incentives you would get as a business that has the vision to support and boost local capacity and production. As a region, we encourage business investments that show sustainability in the sectors and markets they operate in. The benefits of local sourcing and working with local distribution channels in the COMESA region include – reduced cost of sourcing, consistency in supply, reduced time while sourcing, sustainable relationships with suppliers, good reputation for the companies and last and of course of the best, increased profit margins.

Let’s go shopping

Consumer goods ranging from foodstuffs, beverages, toiletries, cosmetics, electronics, hygiene products, childcare products and the like are some of the biggest products that move in the region. The strongest distribution channels for these are supermarket chains, online stores for middle-income earners and kiosks and common market stalls for Bottom of the Pyramid consumers. While COMESA is quickly moving into the middle-income range, it should be noted that consumer habits in some countries range from sophisticated to the simplest distribution channels. The supermarket industry has gone through some volatile times over the past ten years, where decisions such as market expansion, and strong supplier management have plagued the sustainability of some businesses. However, it has become clear that companies such as Shoprite, Choppies and recent entrant in sub-Saharan African markets Carrefour, have a handle on the market dynamics – as they continue to expand into Eastern Africa. As the market grows with an increasing buying power, so does the demand for more products which are durable, cost-effective and consistently available. There is clearly a need for more distribution channels in the region, and partnerships with locally owned enterprises is the most lucrative option, as the market increasingly enjoys locally sourced or affiliated products and services.

What’s next door? Let’s take a tour

“One of the most incredible journeys I have had was visiting the Gorillas,” one of my members told me. I asked him why. “It was not just the fact that I was standing in the presence of one of the most powerful and rarest species on the planet, but also that the green luscious vegetation seems untouched. I literally trekked to see this species and I was greeted with the vast land from one end to another, agricultural resources that are spilling over from the ground. I was then introduced to the wholesome, genuine nature of the people who taught me about things I had forgotten about. I felt like I was living an experience that was purely unique to African soil.” This is Africa.

The COMESA Tourism and Wildlife Heritage Handbook, “One Market, Countless Destinations” (found on http://comesabusinesscouncil.org/Handbook/index.html) takes you on a safari through 19 countries and helps inform your decision on the desired tourism destinations in COMESA. We seek to improve the efficiency of tourism operators to provide transboundary tour packages across the region that are efficient, affordable and offer a once in a lifetime experience! That is not all – as a business investor, you have the opportunity to also consider hotels, high-end cottages, resorts and lodges in the region.

Well then, I do believe you have an idea of doing business in Africa. Now it is time for you to decide. I would bet on the winning horse.



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