IN THE STOPE
DUNCAN BONNETT:
BOX SMARTER IN
A NEW AFRICA
There are many opportunities for South African companies in the rest
of Africa, but they need to get a foot in the door now, Duncan Bonnett,
director at Africa House tells Leon Louw.
Duncan, what are the benefits of the African Continental Free
Trade Agreement (AfCFTA) from a South African perspective,
and what are the chances that it will be implemented
successfully?
Although there is still a lot of scepticism about the ability of
African governments to implement AfCFTA, there are several
trade agreements that have already been implemented with
great success. The customs union that South Africa is currently
a member of, is the world’s eldest such institution. It was
established in 1910 and functions effectively. South Africa is also
part of the SADC Free Trade Agreement. In other parts of Africa,
the Common Market for Eastern and Southern Africa (COMESA)
and the East African Community both function efficiently.
The biggest benefit for South African companies is that they
will get preferential access to a range of markets that they’ve
never had access to before, including critical markets in East
and West Africa.
Traditionally, South African companies have operated
successfully in East Africa only up to Tanzania. North of that, the
cost of doing business becomes just too expensive. However,
when the new trade agreement is implemented, South African
companies will gain preferential access into the substantial
markets of Kenya, Uganda and Rwanda in East African, and into
Côte d'Ivoire, Ghana and Nigeria in West Africa.
As I understand it, the agreement will benefit other countries
as well, so South African companies needs to become really
competitive?
Yes, global companies are looking at access into these lucrative
markets as well, through local assembly operations. The
urbanisation of young and mobile African populations, and the
increased levels of wealth, will continue attracting European
and Japanese automotive companies, for example. This, in
turn, creates opportunities for local companies in some African
countries to start manufacturing or assembling products, and
36
African Mining March 2020
therefore South Africans will have to start boxing smarter. Are
South African based companies looking at tapping into global
supply chains? For example, in the automotive sector, where
most of the supply chains are global.
My understanding is that the South African industry is quite
proactive in that sense. However, are we looking at this in other
sectors of the economy? Are we simply trying to export into
markets, not looking at local value addition to take advantage of
trade agreements, the growing connectivity of markets and the
growing size of markets?
Which countries and sectors of the economy would you say
should yellow metal owners focus on in the next few years?
Energy in Africa will be the main driver of growth in the next
few years, especially the oil and gas sector, but also geothermal
energy, hydroelectricity and renewables like solar and wind.
Estimates are that over the next decade there are opportunities
worth more USD250-billion on the eastern seaboard of Africa
from Mozambique all the way north of Ethiopia. Anyhow, it is an
opportunity that cannot be ignored.
So how does a company entrench itself into those markets?
On the one hand a company needs to get goods into the
country at a preferential rate using the trade agreements and at
the other it needs to add value domestically in those countries
it is selling into in order to qualify for preferential procurement
and local content in those markets so that you have two bites
at the same cake. Preferential-trade agreements are not simply
about intra African trade. Mozambique, for example, has signed
an aid package agreement with the UK, and the EU is constantly
negotiating with various African groupings for more bilateral
free trade, and so is America.
The tariff preferences and benefits will start dissipating over
time as different countries and entities outside of Africa also
negotiate with African countries. So, it is imperative that
www. africanmining.co.za