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New trends in African markets, opportunities for Indian businesses.

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Introduction:

Despite political and socio-economic uncertainties, infrastructure and systemic constraints and bureaucratic impediments, Africa with its latent assets, both in terms of natural resources and a relatively young working population, is well poised to take the high road to economic success. The continent is now better placed, than ever before, to leverage its potential to attract domestic and foreign direct investments to become more competitive in the global economy. Africa is blessed with an abundance of rich natural resources and huge expanse of fertile land area for agricultural exploitation. These assets are crucial in building up value chains – especially in the Agriculture, Agri-food and Mining sectors. About 40 percent of the world’s goldmine reserves are in Africa. The continent also accounts for 90 percent of global resources of chromium and platinum, not to mention the large existing reserves of diamonds, cobalt and uranium, petroleum, natural gas and copper. If one were to take a holistic global view, Africa is currently seen as one of the fastest-growing consumer markets in the world, with domestic household consumption outstripping the continent’s GDP growth, something that bodes well for the economic well-being of the population spread over 55 countries. 

Africa and world

African states have, of late, realized the importance and benefits of liberalizing and diversifying their economies, adopting investor-friendly policies, providing more leeway for private-sector players, formulating, and implementing pro-business incentive packages and focus on improving economic governance. These have proven to be crucial factors in the continent’s economic resurgence in recent years, so much so that we see countries like Ethiopia, Ivory Coast, Senegal, Tanzania, and Ghana, now emerging as the fastest growing economies in Africa. In yet another sign of African revitalization, Egypt was recently ranked as Africa’s top investment destination, followed by Morocco and South Africa. The emerging market in Africa is characterized by a focus on growth, led primarily by the private sector and by markets that are conducive to attracting investments, especially in eight sub-Saharan African countries – namely Tanzania, Uganda, Botswana, Nigeria, Ghana, Zambia, Mozambique and Kenya. Financial Services, Healthcare. Information Communications Technology (ICT), Infrastructure, Transport & logistics, Mining, Agriculture & Agri-processing are some of the main sectors in the African market that are ready and stable to attract foreign investors. 

Africa and India

From India’s perspective, the AfCFTA provides interesting and worthwhile opportunities for Indian businesses and companies. Besides the wider reach, greater market access to the African continent and regional value chains, the single market dispensation would help them to diversify their respective investment portfolios which could be harmonised and tailor-made for African conditions and requirements. It is also an ideal platform to promote India-Africa trade through the Africa Growth Fund (AGF) to enhance greater access to financing options, besides supporting African partner countries through infrastructure financing and undertaking joint initiatives. Indian businesses would have a more level playing field to bring in FDI; setup and upgrade manufacturing facilities, help to create jobs and professional expertise, upgrade technical competency, and build local capacity. This will consequently lead to more robust support for social transformation – with women and youth benefitting the most in terms of better-quality jobs and higher wages. India’s policy towards Africa has, all along, focused on sharing its developmental experience, its expertise and technology, to contribute to Africa’s economic resurgence and economic-diversification plans. The AfCFTA will prove to be a boon for the Indian Pharma and healthcare industry as well as other players involved in Agri-Food manufacturing and exports, Agribusiness, Textiles, Apparel and Clothing, Automotive components, Mobile operators, Insurance, Banking and Financial services.

Challenges

A major challenge for African economies is to manage inflationary trends, streamline foreign exchange reforms, optimally balance devaluation of currencies and reign in the parallel currency markets. Services have become the major driver of Africa’s economic output. Financial Services in the African continent is being powered by the rapid rise in urbanization, increased use of digital technology by different sections of the society, and most importantly – by the steady rise in household income, resulting in enhanced demand for services like banking, insurance, mobile payments, and loans & credit. South Africa leads the way in offering first-rate financial services by hosting large numbers of listed companies on its stock exchanges, while Morocco’s Rabat-Casablanca continues to be Africa’s leading financial hub. Retail trading in Africa also offers immense opportunities but that also comes with complex challenges and constraints like shortfalls in supply-chain management, poor infrastructure, government policies, social dynamics, lack of adequate and optimum levels of ICT infrastructure etc. These constraints not-withstanding, there is still immense scope for growth in the African retail market given the ever-Increasing scale of e-commerce, online marketplaces and Fin-Tech platforms. Almost one-seventh (14 percent) of the global population is based in Sub-Saharan Africa, which accounts for a substantial share of the global consumer market. South Africa, Nigeria, Kenya, Ivory Coast, Tanzania, and Ghana are the leading market drivers in the African retail sector. With rapid urbanization comes the enhanced demand for consumer products, which in turn has spawned an ever-growing number of retail outlets, departmental stores, hyper-markets, and supermarkets. The next ten years is likely to see incremental increase in volume in the African retail market, driven by the swelling number of upwardly mobile ‘middle class consumers’ with expendable income. The retail electronics trading sector is primarily sustained by the increasing demand for Laptops, Tablets, Phones and Phone Accessories, Smart Watches and Headphones. 

Conclusion

The AfCFTA will prove to be a boon for the Indian Pharma and healthcare industry as well as other players involved in Agri-Food manufacturing and exports, Agribusiness, Textiles, Apparel and Clothing, Automotive components, Mobile operators, Insurance, Banking and Financial services. It will facilitate Indian SMEs seeking to setup businesses in Africa, by providing access to raw materials and services at competitively lower costs. Indian ICT companies can help to upgrade the digital infrastructure in the continent and leverage new trends in Artificial Intelligence to support projects in areas like agriculture (providing real-time data on crops/livestock), education (online learning platforms), medical and healthcare services (electronic-tele-medicine) etc. These positive trends in the African market, augur well for Indian public and private sector initiatives to succeed in the new Africa that is fast transforming as a viable and sustainable investment destination. Just as the new crop of aspiring, confident young African entrepreneurs set forth to rediscover the inherent potentialities in leveraging the new market trends, Indian investors and trading entities are also eyeing the enormous opportunities in an economically vibrant Africa, with optimism and hope. 

Indeed, the world is watching too and there is a lot to look forward to!