Category: Thought Leadership

  • 2nd August, 2021
  • 3 min reading

The easing of the pandemic, aided by global vaccine rollout, means that African markets are shifting their focus to post-pandemic recovery. After 16 months of uncertainty, which has resulted in the economic stagnation of African economies, where trade and investment activities have ground to a halt.

With the gradual resumption of trade and investment in Africa, there has been a renewed focus on environmental, social, and governance (ESG) factors, which is now taking stage in the trade and investment domain. The increased insistence in the inclusion of ESG factors has been driven by investors in Africa, aided by continued government stimulus, and supported by Development Financial Institutions (DFIs) and multi-national development banks.

While the pandemic has not affected all African economies as severely as predicted the pandemic has still had a severe impact on some of the most vulnerable economies such as Angola and Zambia, which lack the macroeconomic opportunities of countries such as South Africa, Nigeria, and Egypt. The recovery from the pandemic is a key focus for Africa, and provides an opportunity for ESG factors to become a key requirement when deciding where, when and how to direct funds back into Africa, and to ensure Africa’s recovery is sustainable particularly from a trade and investment perspective.

Although ESG initiatives have been fully embraced in other parts of the world it seems that Africa has some catching up to do, and has fallen short when it comes to its implementation and ability to unlock the benefits that linked to ESG factors. Despite Africa’s diverse natural resources, renewable energy potential, human capital and significant development opportunities, connecting investors (many situated offshore) with investees on the continent is not always straightforward.

Unfortunately, this scenario has resulted in missed opportunities and limited the ability of ESG components, such as monitoring how companies manage energy or pollution issues, to penetrate investment flows into African projects that would otherwise enable the promotion of ESG investment goals within the continent. For now, Africa’s most visible contribution is through initiatives that are associated with ESG-related criteria that assist the UN accomplish its sustainable development goals, in other words, social impact projects.

Africa’s ESG Potential

How Can African Economies Unlock Their ESG Potential?

A key factor for unlocking this potential is for investors in Africa to become more aware and comfortable with the risks associated with investing in developing markets, as well as for them to find “sustainable assets” that can provide acceptable returns. Companies that recognize the potential of ESG must be able to clearly demonstrate how effectively they manage their operation, which includes how they interact with stakeholders, understanding their environmental impact, and how they detect and manage risk.

A strategy that can assist Africa in unlocking its ESG potential is through the collaboration of funding or co-funding initiatives with Development Finance Institutions (DFIs).

In this case, DFIs come in handy as DFIs have a long history of being sources of finance in Africa, often providing riskier, longer-term investment capital with an emphasis on sustainability, and enticing commercial lenders to engage using ESG-like metrics. As investment vehicles, DFIs can plug funding gaps on projects that banks might turn down due to concerns over the risk or length of an investment, as most banks tend to be more focused on shorter investment loans and less risky projects.

DFIs have traditionally worked two-fold. On one hand, banks have facilitated their investments on the continent – which is known as wholesale lending. DFIs lend money to an African or an international bank with on the ground connections, who then lend money to the agreed upon framework using embedded infrastructure. As these loans are funded by the DFI, they are traditionally sustainable in nature, adhere closely to the ESG requirements of the lender, and require reporting and validation.

The combination of DFI capital, which can be used to make riskier investments, with a national or international bank’s capital, reaches more businesses and opportunities for trade and investment activities while alleviating some of the bank’s reporting and validation obligations.

The potential benefits of this approach is that smaller businesses can also benefit from this arrangement. SMEs are critical to Africa’s development, especially from a trade and investment perspective and it is only by fostering the growth of entrepreneurs and SMEs that Africa will be able to eradicate poverty and progress to the next level. Hybrid lending arrangements that handle risk that banks are unwilling to take on, along with investments in ESG and sustainable development initiatives, can, and will pave the way for Africa’s future growth and development.

  • 14th July, 2021
  • 3 min reading

Businesses within a trade and investment environment have spent most of the last fifteen months attempting to adjust to unusual conditions. While the struggle against the pandemic is far from over, there is now a glimmer of hope and optimism in the air. The reality of things now is that companies or individuals that want to trade and invest in Africa must adjust their approach in order to survive.

Various reports suggest that economic recovery from the pandemic could take 2 years, or more. The Africa’s Pulse report which was recently released by the World Bank, suggests that economic growth in sub-Saharan Africa will decline from 2.4% in 2019 to between -2.1% and -5.1% in 2020 and beyond, depending on the success of measures taken to mitigate the pandemic’s effects.

The pandemic has presented a challenge for businesses to reinvent themselves in order to survive and take advantage of prevailing economic opportunities; the main way of achieving this is by restructuring themselves and their business operations. Adaptability is the key to solving this conundrum, and any entity that is not able to adapt and be agile within a short period of time is unlikely to survive in the long-term. The inability to adapt quickly or become agile and take advantage of economic opportunities in the post pandemic environment is one of the key challenge’s businesses are facing in Africa. So how do businesses that wish to take advantage of trade and investment opportunities in Africa navigate the new post pandemic world, and what are the economic opportunities?

TRADE AND INVESTMENT IN AFRICA - DO’s AND DONT’s

The Do’s and Dont’s of Trade and Investment in Africa Post Pandemic

The Do’s

Technology is now a game changer for businesses – The rapid adoption of technology, digitisation, and new ways of working will continue to accelerate. Most of the businesses that did not embrace technology at the onset of the pandemic are nowhere to be found today.

The name of the game is surviving rather than economic efficiency – To secure survival in the post-pandemic environment, contingency planning should be integrated into every link of the value chain. Businesses will have to be much more strategic in deciding which alliances are vital and which are transactional, rather than building relationships based on leverage and getting the better end of the bargain wherever feasible.

Trade and investment initiatives need to look inwards; hence the strengthening of intra-regional and Intra-Africa trade is critical. Regional partnerships are critical for businesses. There needs to be concerted efforts to harmonize trade-related regulations, customs controls, and reduce both tariff and non-tariff barriers. The implementation of the African Continental Free Trade Area (AfCFTA) provides opportunity for this to become a reality.

The Don’ts

Don’t be stuck in your old ways – Companies that hurry back to old ways of trading in Africa may very well stumble and stagger in the decade to come. The pandemic has given companies that want to trade and invest in Africa the opportunity to transform and prepare for a more turbulent world. First, they must be able to fully reimagine the boundaries of their company from an African trade and investment perspective.

What do you want inside vs. outside? In other words, post pandemic environment (the outside) dictates that companies that revert to business as usual (the inside) will not survive for long, the way businesses must now function are dependent on the adoption of a set of different rules and skills. These emerging post pandemic rules and skill sets are going to be based on two key principles, namely the ability to be agile and quickly adopt change, and secondly, the mindset to understand the importance and necessity for change.

Don’t assume anything – Don’t take your existing clients for granted, post pandemic you should throw away old assumptions: The raw customer needs that will define your industry may be drastically different. What are your customer’s needs? Be resilient and adapt as you progress, responding to your customers’ evolving needs. And beware of new entrants that could leapfrog you to meet those needs faster, cheaper and better.

In conclusion, your Africa trade and investment strategy post pandemic will be less about beating your economic opponents and more about how businesses can help to battle a bigger, common adversary, such as climate change, pandemics, or maybe socio-political ills such as inequality.

  • 1st April, 2020
  • 2 min reading
The coronavirus is significantly impacting with all businesses feeling the effects. Here Bolaji Sofoluwe explains how ETK Group has expanded its services in response to the pandemic. There is no question that the outbreak of Covid-19 has had a huge impact on services, supply chains and staff provision. The disruption affects new trade relationships between the UK and Africa, so it is important that, as a company, we respond to the new demands. To help our clients, and potential new business, we are adapting our services. We know that it is very uncertain around the world, and that in a lot of cases, systems as we knew them before, are on a temporary go slow. In response, ETK will be offering support with expediting payments, managing human resource relationships, in-country representation, supply chain interruption and resilience consulting.

Payments

Anyone experiencing delays in receiving payments from African suppliers or businesses can be helped by our finance and credit control experts. We have several trusted partners with whom we can work to ensure our clients experience the minimum possible hold-up. Our partners offer tailor-made, robust solutions to ensure that our clients receive their business-critical payments – vital in today’s climate.

In-country representation

This is handled by ETK’s global associates who work on the ground in Africa. The service is aimed at people who have been forced to cancel their trips to Africa due to travel restrictions. However, they still need to progress negotiations. Our team can represent our clients in many ways. ETK can provide help with crisis management in Nigeria, Egypt, Kenya, South Africa, Uganda, Ghana, Tanzania and Angola.

Supply chain interruption

ETK can communicate with existing suppliers or source alternatives for businesses who require help with supply chain interruption and resilience consulting. This is the case for both internal interruption such as the breakdown of vital machinery, or external, for example the disruption to the flow of raw materials or parts to the business. We will work with companies to undertake a comprehensive business impact analysis to prepare their firms to address the impact of possible future supply chain disruption. This will strengthen the existing supply chain, identify alternative supply chain partners and look at ways to manage product demand, and as a result, will protect sales, revenue, cash flow and business reputation.
  • 20th January, 2020
  • 2 min reading

The time is now for UK-based businesses to strike trade deals in Africa, one Essex businesswoman has claimed.

Statistics from HMRC have revealed that in 2018, the largest exports from the East of England to Africa were medicinal and pharmaceutical with a value of more than £90.1million.

Bolaji Sofoluwe, Managing Director of Colchester-based ETK Group which is the lead consultancy for African market entry and African business growth, is a guest speaker at an event next month explaining why businesses should export to the continent, and put in place an Africa export strategy.

Export strategies

The event, Selling to Africa – A Focus on Life Science Opportunities, has been organised by Exemplas Trade Services Ltd on behalf of the Department for International Trade (DIT) in the East of England.

Bolaji Sofoluwe, managing director of ETK Group

Mrs Sofoluwe, who has been involved in brokering deals for clients in the East to export to Africa, said: “Now is the time for healthcare and life science companies to be looking to include Africa in their export strategies.

“This event will help SMEs to start or expand their export business to Africa which can often be seen as a difficult and challenging market to enter but rich with opportunities.

“That is where ETK Group can provide expertise in overcoming obstacles such as legislation and trading practice, finding partners and understanding cultural differences.

“ETK Group has been introducing UK businesses to Africa and vice versa since 2012. As a result, the East of England is leading the way with export and import to countries including Nigeria, South Africa and Kenya.

“As a result of Brexit, many small and medium-sized businesses have explored opportunities in Africa. I hope this is a sign of greater things to come and the unlocking of prosperity between the UK and Africa.”

Actions to Develop Your Africa Export Strategy

Issues that are identified at the event will be taken by DIT to build up a framework of actions including market access, commercial contracts and licensing, regulatory processes and access to financial products.

Clients have included an Essex-based juice concentrate manufacturer looking for direct sales opportunities in Kenya and a Norwich-based Agritech firm which partners with a Nigerian University for product testing.

ETK Group works with clients to build trust and confidence in trading and investing in Africa and helping Africa-based companies expand their international footprint.

Selling to Africa – A Focus on Life Science Opportunities will be held at The Granta Centre on Granta Park, Cambridge, on Thursday, March 5, from 9.30am-4pm.

For more information, visit the website, email diteastevents@mobile.trade.gov.uk or call 01707 398398.

For more information about ETK Group, call the team on 01206 563698.