African Mining March 2020 | Page 38

 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