By Derrick Roper, CEO of Novare Equity Partners.
During a recent trip to one of our shopping centres in Lagos, Nigeria, I took a drive to see the progress of the Dangote Refinery, a $19 billion project that is the showpiece of the Lekki Free Trade Zone.
It’s a vital opportunity for us, as it falls within the Novare Lekki Mall catchment area.
The sheer scale of the refinery and the developments slowly unfolding around it to boost exports and create jobs amazed me.
The project is unparalleled. The free trade zone has seen the development of a deep sea port, with ambitions to develop a new city featuring a new international airport, a university, 12-lane roads, hotel resorts and beaches.
The metamorphosis of Lekki – parts of which were slums and now some of the priciest real estate in Nigeria – is symbolic of the transformative economic journey the continent has embarked on.
One that promises to elevate millions from poverty, boost incomes, and foster sustainable development.
The African Continental Free Trade Area (AfCFTA), an ambitious initiative to create the world’s largest free trade area, is the catalyst for this paradigm shift.
As someone who spends 40% of my time travelling on the continent outside of South Africa, I am optimistic about our strides yet mindful of the hurdles ahead.
The potential benefits of AfCFTA are unlimited. It offers a pathway to socio-economic prosperity for a continent grappling with multiple challenges.
The attraction lies in economic gains and the possibility of easing political tensions that have historically haunted many African nations.
The World Bank estimates that AfCFTA, which will unite 1.46 billion people in 55 countries, could lift 50 million out of extreme poverty by 2035 and expand incomes by 9%.
The program aims to get African countries to trade more with each other (currently, they deal more with the rest of the world) to boost a combined economy about the same size as India.
However, reaping the full benefits of this initiative demands sustained cooperation and collaboration on a scale never seen before: African governments will need to pull together and get support from international governments, the private sector, civil society, the international community, and investors.
While many foundational blocks for AfCFTA are in place, challenges persist. Internal hurdles such as power shortages in South Africa, policy uncertainty, and foreign exchange shortages in Nigeria present formidable obstacles.
Additionally, debt defaults in Ghana and Zambia and political instability due to coups in several African countries cast shadows on the feasibility of attracting investors.
However, against this backdrop of challenges, foreign investors are flocking to Africa in unprecedented numbers.
Led by Chinese investments in critical infrastructure, the US, Europe, and the Middle East are trying to make strategic gains. Russia is also trying to extend its influence using its military.
The motivations behind these investments are clear – nations are positioning themselves to capitalise on the expected surge in intra-Africa trade following the breaking down of trade barriers.
The big economies, including Egypt, South Africa, Nigeria, and Kenya, are expected to drive the success of AfCFTA.
The positive momentum is further reinforced by the financial backing from institutions such as the African Development Bank (AfDB) and African Export-Import Bank (Afreximbank), funded by African governments.
A noteworthy aspect is the support from the BRICs nations (Brazil, Russia, India, China and South Africa) and the active encouragement of trade missions by international governments.
Recent visits from the Commonwealth Enterprise and Investment Council, which facilitates trade and investment throughout the 56 member nations of the commonwealth, and the Dutch royals illustrate this interest.
The focus on energy and green energy, specifically sustainability, has garnered significant attention. The recent surge in the appeal of green hydrogen underscores the potential financial opportunities associated with sustainable energy solutions.
According to Bloomberg, the Netherlands and Denmark will help create a $1 billion green hydrogen fund for investment in South African renewable energy projects.
This, coupled with the momentum gained over the past few years, signals a promising future for AfCFTA as it continues to gain traction and more trade is initiated.
Opportunities abound, particularly in smaller manufacturing facilities focused on shoes, clothing, and food processing.
A notable example is South Africa’s potential to export meat to West Africa and Central Africa, where it can be processed, showcasing the diversification of trade possibilities.
Healthcare is another promising sector, with opportunities in warehousing and cold storage facilities.
These initiatives enhance the supply chains of vaccines and medical supplies and provide better quality healthcare for the African consumer.
Agriculture’s pivotal role in securing food security remains a colossal opportunity. Investors recognise the importance of this sector in ensuring self-sufficiency and stability.
Novare Equity Partners sees its role as a conduit for advising, connection and partnership. To foster collaboration, we are actively engaged in healthcare initiatives, providing real estate solutions for data centres and partnering with international retailers.
We operate malls in several locations in Nigeria, Mozambique, and Zambia and believe in ensuring our facilities are built to minimise our carbon footprint and enhance the well-being of our communities.
Our goal is not merely to offer real estate but to serve as trusted partners, guiding the operations of global players on the African continent in other projects.
With a track record spanning 15 years, we bring to the table solid relationships, in-depth knowledge of African countries, and a commitment to being investment specialists focused predominantly on Africa and sub-Saharan Africa.
Despite all these opportunities and prospects on the continent, getting the deal over the line with many investors and business leaders is often tricky.
In the face of concerns and challenges, my experience has shown that the most effective way to convince sceptical investors and business owners is to bring them here.
Immersing them in the local environment, allowing them to witness the opportunities firsthand, and meeting the local people helps dispel doubts.
Picking the right partner is vital to making a deal work. Business transactions can be rewarding with strategic partnerships, prudent investments, and a collective commitment from stakeholders.
In the same way, AfCFTA can pave the way for a new era of economic resurgence in Africa.
The Lekki Free Trade Zone was started in 2006, while the Dangote Refinery reportedly cost double the initial amount and took seven years longer than planned.
Talks to begin a continental free trade area started in 2012 and came into force in 2019, with trading commencing at the beginning of 2021.
These are long-term plans, and there’s no doubt that the journey toward trading freely among African countries is challenging.
It’s not a quick cruise on the highway, but the reward at the end of the trip will be spectacular.