Impala Platinum (Implats) is a long-time investor in the North West Province and one of the world’s largest producers of platinum and palladium. The operations in Rustenburg include a multi-shaft mining complex and concentrating and smelting plants. Credit: Implats
Pilanesberg Platinum Mines created Community Crusher as a non-profit enterprise, but with 14 employees and a steady set of orders for building projects run by the company, the small business is showing the potential to become a bigger business.
Many mines run similar programmes, sourcing goods and services from local community-based companies and sometimes providing mentoring and advice on how to improve as businesses. Impala Platinum (Implats) has a programme of procurement in which it supports local business and black-owned businesses through enterprise and supplier development programmes.
Pilanesberg Platinum Mines has been active 80 km north-west of Rustenburg for just over ten years. Mining operations are conducted by contractors while PPM manages the concentrator (screen, crush, mill, float, thicken and dry). The operation has annually achieved an average of about 150 000 ounces of platinum group metal (PGM) concentrate.
The Provincial Government of the North West is in talks with several mining companies in the Matlosana Local Municipality area (which includes Klerksdorp and Orkney) as some mines are being closed down. One of the initiatives to extract more value from mining is the proposed Platinum Valley Special Economic Zone. Creating a base for companies to supply the mining industry is one of the key drivers behind the scheme.
The SEZ is intended for Mogwase in the Bojanala District, north of Rustenburg and east of Sun City. When fully developed, 200 ha of land will be taken up by three infrastructure facilities comprising Logistics, Light Manufacturing and Heavy Manufacturing.
The Seda Platinum Incubator (SPI) is an initiative of the Platinum Trust of South Africa and is funded by the Small Enterprise Development Agency (Seda) through its Seda Technology Programme (Stp) with the support of the North West Provincial Government and private companies.
North West mining news
Several mining companies are investigating energy – both in order to power their own operations because of the risk of the national utility failing to supply electricity, and to find new uses for platinum.
Bushveld Minerals has two arms; Bushveld Vanadium and Bushveld Energy which is working on Vanadium Redox Flow Batteries (VRFB). Energy storage is the focus of much research across the globe and Bushveld Energy intends its solar installation at its Vametco mine, supported by VRFB, to answer many questions. Bushveld Vanadium is one of three vanadium producers in the world.
Credit: Bushveld Minerals
Sibanye-Stillwater has renamed the mining operation it bought from Lonmin in 2019,
Marikana. The sale was comple-ted in June 2019. This is Sibanye-Stillwater’s second major purchase of platinum assets in the North West, after buying Anglo American’s Rustenburg Platinum Mines Limited.
Between the fourth quarter of 2018 and the fourth quarter of 2019 the global price of platinum slumped, but a later surge in the price of other PGMs such as palladium and rhodium offset this downturn. The fact that the mining industry continued to operate through most of the lockdown that accompanied the Covid-19 outbreak helped to bring some stability back to the sector.
In early 2020 rhodium rose to its highest price since 2008, $8 200/oz, and palladium ach-ieved a new record high of nearly $2 150/oz. Some mining companies discovered that several of the other minerals that are present in their mines (gold, copper and nickel) were surging in price, causing them to investigate ramping up operations.
Some companies chose to sell assets while others have undergone major restructuring. Impala Platinum will spend R2.7-billion over two years to scale down production from 11 shafts to six lower-cost, profitable, shafts. In FY2018 Impala produced 580 800 ounces of refined platinum. Impala Refinery Services (IRS) smelts and refines concentrate and matte and recycles auto catalysts.
The mining sector still makes a big contribution to provincial GDP although that percentage is now below 30%. About 18% of total employment in the province is in mining.
North West mineral resources
The North West Province is aligned with the Western Limb of the Bushveld Igneous Complex, a remarkably rich minerals formation. Mines in the province produce 50% of the platinum produced in the world, and 65% of South Africa’s PGMs. Chromite is the other major mineral mined throughout the province, and there are several ferrochrome smelters and other processing plants.
South Africa produces about 70% of the world’s chrome. Gold and uranium are found along the border of the province with Gauteng and the Free State (in Klerksdorp and Orkney). Diamonds are mined at Christiana, Bloemhof and Lichtenburg. Other minerals include fluorspar, vanadium, rhodium, uranium, copper, limestone, slate, phosphate, manganese, coal and nickel. Limestone quarries run by G&W Base and Industrial Minerals in the Marico District are located next to a PPC cement factory.
One of the last economically viable limestone deposits in South Africa is mined and processed by Sephaku Cement. Sephaku runs a 6 000-ton-per-day clinker plant near Lichtenburg. AfriSam, PPC and Lafarge are active in the Mahikeng/Lichtenburg area, but Sephaku is confident that its clinker and cement-production facilities will be supported by raw materials for at least 30 years. AfriSam has taken measures to reduce carbon emissions at its Dudfield cement plant.
On 5 February 2021, the U.S. Consulate General in Cape Town and the Western Cape government jointly launched a Trade and Investment Promotion Partnership which will build on the momentum of the existing economic relationship to promote shared prosperity and economic development.
At the launch event, Western Cape Minister of Finance and Economic Opportunities, David Maynier, and U.S. Acting Consul General in Cape Town, Will Stevens, pledged to deepen cooperation and coordination to promote and increase bilateral trade and investment through various engagements, events, and high-level interactions.
The partnership will leverage the decades of innovative trade and investment promotion through the Western Cape’s agencies such as Wesgro, and the services, resources, and expertise of 17 U.S. government agencies to support U.S. and African businesses, and the African Growth and Opportunity Act (AGOA), which allows duty-free exports of more than 6,500 goods from Africa to the United States.
Speaking at the launch, Minister Maynier said, “The United States is a key tourism and business market for the Western Cape, and the biggest source of foreign direct investment for the Western Cape, so I am excited about the potential for further investment and economic growth for both regions through the Trade and Investment Promotion Partnership.”
Acting Consul General Stevens said, “The trade and investment promotion partnership builds on our strong relationship with the Western Cape and the U.S. government’s commitment to increasing our already robust trade and investment. The partnership also reflects the U.S. private sector’s increasing interest in investing in the Western Cape and the potential for further expanding bilateral trade.”
The economic relationship between the United States and the Western Cape is robust and growing. The Western Cape’s diverse and dynamic economy attracts investment from U.S. companies—big and small—and the United States has been the top foreign direct investor in the Western Cape for many years. U.S. companies have invested in the province, have created tens of thousands of jobs, offer training and skills development, and support local communities through outreach and humanitarian programs in the Western Cape.
Bilateral trade between the United States and the Western Cape is increasing. Over the last 20 years, trade has risen by 335 percent and is currently valued at approximately 17 billion Rand annually. In 2020, bilateral trade grew despite the COVID-19 pandemic. This growth included a 68 percent increase in citrus exports and a 78 percent increase in wine exports to the United States. Hundreds of companies in the Western Cape export to the United States as part of this reciprocal trade. Western Cape companies are also setting up operations in the United States or forming commercial partnerships with U.S. companies.
Two major transport projects in the North West will create conditions for better mobility to and from the province and within its principal city. The South African National Roads Agency Limited (SANRAL) opened the R512 Pampoennek road in September 2020 and the elements of the Rustenburg Rapid Transport scheme are coming together to promise enhanced movement around the province’s most populated urban centre.
The R512 connects the towns of Brits in the North West and Randburg in Gauteng via Hartbeespoort, providing a good connection to the N4 highway. The cost of the road project through Pampoennek was R377-million and the road was opened by Transport Minister Fikile Mbalula.
“This road gives expression to the notion that transport is the heartbeat of the South African economy, playing an integral part in the country’s economic growth. Roads are an essential part of South Africa’s transport system and are important infrastructure to enable economic activity and access to social amenities,” said Mbalula at the ceremony.
Skhumbuzo Macozoma, CEO of SANRAL (left), and Fikile Mbalula, the Minister of Transport, celebrate the opening of the Pampoennek Road in the North West.
SANRAL is currently working on other roads in the North West, including the N14 and N12 highways. SANRAL’s Horizon 2030 strategy aims to ensure that local communities benefit when roads are built in their areas. Construction of the Pampoennek route generated 209 permanent jobs for locals with R27.4-million spent by August 2020. About 180 people were offered training and 12 subcontractors were employed on the project.
Moving Rustenburg
Rustenburg is one of the fastest-growing cities in South Africa. With a population of more than 500 000, city planners have turned their attention to improving the quality of life for commuters through an integrated and intelligent public transport system.
Rustenburg Rapid Transport (RRT) aims to manage and allocate road space more efficiently, to reduce the number of vehicles on the road and ultimately to provide a better user experience for people using public transport and for people working and walking in the inner city.
Bus Rapid Transit (BRT) is one of the elements of the RRT system. There are two main BRT corridors where passenger volumes are high. The corridors will have dedicated bus lanes with walkways and stations which allow for easy access.
The RRT system is designed to cater for up to 75 000 commuters daily when operating at full capacity. Construction of the RRT project’s road network has begun and various other projects have been undertaken related to the project, including traffic lane upgrades and the installation of dedicated traffic lights and signals. Cycle lanes and walkways for cyclists and pedestrians have been constructed to complement the RRT system.
In June 2020, the Rustenburg Local Munici-pality welcomed the first Yarona Bus at a session held at the Rustenburg Civic Centre. The RRT project will begin with a testing and training phase and the first bus will be used by the Rustenburg Rapid Transport team to train drivers, and test various infrastructure components including stations and priority traffic lights in a build-up to the main launch.
The Rustenburg Rapid Transport programme forms part of the road-based component of the national Bus Rapid Transport Strategy, overseen by the National Department of Transport. Its goal is to ensure swift movement of large numbers of people between parts of a city in a quick and safer way.
The local taxi industry has been working closely on the programme and affected taxi operators will create and run a bus-operating company (BOC). Several milestones have already been reached in this sphere, namely the creation of Taxi Negotiating Forum and the signing of a Memorandum of Agreement.
There are further plans for public transport to become more integrated in the future. This might involve co-branding and a single fare system.
On the topic of regulation, Executive Mayor Mpho Khunou says that a “fully-fledged transport entity” is being discussed for the future. “As things stand, the only people who will participate in this new system are going to be those who are affected,” says Khunou.
“The idea moving forward is to involve other parts of the industry, then you can then regulate all forms of transport in the city. That is something we are looking in to that will happen a bit further into the future.”
Development corridors, a proposed Special Economic Zone (SEZ), industrial parks and agri-parks with differentiated focus areas are among the interventions planned to stimulate the regional economy and create employment opportunities.
The North West Department of Economic Development, Environment, Conservation and Tourism (DEDECT) has committed to entering partnerships with the Automobile Industry Development Council (AIDC) and the Industrial Development Corporation (IDC) to revive industrial parks in the province and create industries that will target niche markets.
The creation of district agri-parks is intended to boost primary production which in turn will increase the amount of raw material that can be processed. Companies making car seats within the province’s active automotive parts sector would be a ready market for treated hides from the huge provincial cattle herd.
The province’s strategic location goes beyond the obvious benefit of its proximity to the province of Gauteng: the major roads linking trade on an east-west axis pass through the province, as does the major railway line which runs from Cape Town in the south to Zimbabwe and beyond in the north. These advantages will be enhanced by four Provincial Strategic Development Corridors, two of which are:
The Eco-Tourism Corridor, Bojanala District. This corridor extends beyond the tourism sector (which includes the Hartbeespoort Dam to Sun City, game lodges and game reserves) and will be supported by the Platinum Valley Special Economic Zone, the automotive industry in the Madibeng area and the mining opportunities that occur throughout the district.
The proposed PVSEZ in the Mogwase Indust-rial Area will be designed to create space for
enterprises which supply the mining industry. Other targeted sectors are capital equipment manufacturing, renewable energy, agro-processing and general manufacturing. Discussions are underway with the National Department of Trade, Industry and Competition (dtic) for the licensing and commissioning of the SEZ.
The N12 corridor in the Dr Kenneth Kaunda District. By promoting residential and commercial activity along this route, it is intended to integrate the economies of the towns of Matlosana and Tlokwe. Private developers are thinking of regional links for their new development in Vryburg, which is at the intersection of the N14 highway (Johannesburg-Upington) and the N18 highway which connects Kimberley to Mahikeng. Twin City Development and Vuno Developments are spending R290-million on the town’s first retail mall, which will serve as a regional attraction. Twin City Development is partnering with the Moolman Group in the construction of the new Rustenburg Mall.
Spatial thinking requires infrastructure to underpin it. In 2020 the North West Department of Public Works and Roads was busy with 13 road construction projects valued at R900-million.
New roads such as this link to the North West from Gauteng are important parts of infrastructural development. Credit: SANRAL
North West Provincial Economy: Overview
Geography and economy
The North West is bordered on the west by the Republic of Botswana and on the east by Gauteng, the engine of the South African economy.
The North West province makes up 6.8% of the population of South Africa (3.6-million), 8.7% of the land mass (105 076 km²) and accounts for 5.8% of economic output in terms of gross value added.
The Vaal River runs along the province’s south-eastern border with the Free State, and the province also shares borders with the Northern Cape to the south and Limpopo in the north.
The mineral reserves in the province are enormous. Platinum group metals (PGMs) predominate but there are significant deposits of gold, uranium, diamonds, copper, vanadium, fluorspar and nickel. Stone and limestone are also found in large quantities. Mining beneficiation takes place at many places, with Rustenburg being particularly strong in this sector. The economy of the town is closely linked to the fortunes of platinum mining, with the sector contributing about 70% of the city’s gross geographic product.
Automotive components firms are clustered in Brits, which in turn is close to the automotive manufacturing hub of Rosslyn (Pretoria) in Gauteng. Towns like Klerksdorp (agro-processing and engineering) and Potchefstroom (food and beverages) also have manufacturing capacity.
The North West is a major producer of maize and sunflower seeds and many other agricultural products. About 20% of South Africa’s maize comes from the province, as does 15% of its wheat. The dry western part of the province is home to beef cattle, game ranching and hunting. The normally well-watered eastern and north-eastern regions carry varied crops, many of which are sold in Johannesburg and Pretoria.
The agricultural sector also generates large-scale storage and logistics operations, particularly in Klerksdorp, Vryburg and Brits, together with a number of agro-processing plants. Senwes is one of the biggest with extensive silo infrastructure while Suidwes has 17 retail outlets and MGK makes full-fat soy at its manufacturing plant. Lichtenburg-based NWK makes liquid fertiliser and animal feed, processes sunflower seeds and runs 37 silos and three grain mills.
The province’s three Technical and Vocational Education and Training (TVET) colleges and the well-respected North-West University all have several campuses catering to a wide range of educational disciplines. The university has a strong reputation as a research institution.
Major towns
The capital city of the North West Province, Mahikeng, lies on the banks of the Molopo River. Situated in the north-west sector of the province near the Botswana border, the city has a strong services sector and a population of approximately 300 000.
The city’s main sectors are financial services, services, transport and trade. The Garona District houses the North West parliament and government buildings. The arts are promoted by the Mmabana Cultural Centre, while the North West Institute of Hotel and Tourism Management is one of three tertiary institutions in the city.
North-West University’s Graduate School of Business and Government Leadership is located in the city, and Unisa has a presence. Other institutions are the Taletso TVET College and the International School of South Africa.
The town is well served by hotels such as the Mmabatho Palms, Hotel and Casino Convention Resort. White rhino and giraffe can be found at the Mahikeng Game Reserve.
The city of Potchefstroom is administered by the Tlokwe Local Municipality. A large campus of North-West University and its business school is located in the city, as is the Vuselela TVET College and the Potchefstroom College of Agriculture. More than 120 000 people regularly attend the annual Aardklop Festival. The city has a population of about 173 000. The sports facilities of North-West University are world class and have been the base for Spain’s soccer team and Australia’s cricket team in world cups. Tlokwe is a hub for the strong commercial agriculture of the region and has several food and beverage manufacturers including Nestlé.
Some of the bigger enterprises include fertiliser companies such as Kynoch, munitions manufacturers, and food processors like King Food. An army base contributes to the economy, and the airfield formerly used by the military is now run by the municipality.
The N12 Treasure Route passes through the city and holds potential for further development of tourist highlights such as Boskop Dam and the Mooi River on which the town is located.
Rustenburg is a local municipality within the Bojanala Platinum District Municipality and the headquarters of both bodies are in the city of about 625 000 residents.
Rustenburg straddles the N4 “Platinum Highway” about 120 km west of the cities of Pretoria and Johannesburg in the Gauteng Province, the economic hub of South Africa. The N4 stretches across South Africa from Mozambique in the east, to the Botswana border in the west and, as the Trans Kalahari Route, ultimately to Namibia.
At the foot of the Magaliesberg Mountain Range, Rustenburg is only 50 km from one of the country’s premier tourist resorts, Sun City, which in turn is adjacent to the 550 km² Pilanesberg National Park and Game Reserve which has a small airport.
Orbit TVET College has a campus in Rustenburg, Unisa has a regional office and the Agricultural Research Institute’s Industrial Crops Division is also located in the city.
The Royal Bafokeng Sports Palace hosted five group matches in the 2010 World Cup. Platinum mining began in 1929 and has driven the city’s growth ever since.
On 1 January 2021 a new era in African trade began. All but one of Africa’s 54 countries have signed on to the African Continental Free Trade Area (AfCFTA) and 34 countries have ratified it. Implementation was postponed for six months because of Covid-19.
Eritrea is the outlier but fully 41 members have already submitted tariff reduction schedules, suggesting that there is an appetite for getting down to detail on this agreement, rather than leaving it in “talking shop” mode.
Tariffs on 90% of items are due to be reduced in the next decade. More time has been allocated to poorer countries to allow them to adapt, 7% of items will take longer and 3% can stay protected.
The African market of 1.3-billion people is expected to grow to 2.5-billion by 2050 but the key statistic targeted by AfCFTA is intra-African trade. If the agreement is to have meaning, then the insipid figure of 16.6% in 2017 must grow. This compares with 69% in Europe and 59% in Asia (United Nations Conference on Trade and Development and Brookings Institution).
Exports to the rest of the world made up between 80% and 90% of Africa’s total trade from 2000 to 2017 (UNCTAD). In 2019 only about 27% of South Africa’s exports were delivered to the rest of the continent.
Just four countries currently account for 41.7% of intra-African trade, South Africa, Namibia, Nigeria and Zambia, according to the Export Credit Insurance Corporation of South Africa (ECIC). The ECIC has invested in the African Export Import Bank in an effort to boost intra-continental trade to $250-billion. The South Africa-Africa Trade and Investment Promotion Programme has the same goal.
Areas with existing regional trade blocs that function well – such as the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC) – will likely be the quickest to gain from AfCFTA. These regional groupings are best placed to start thinking beyond tariffs: more efficient customs posts, lower air-freight costs, better-run ports, regulatory alignment and improved rail and road infrastructure.
Railways, roads and ports are not the only kinds of logistics infrastructure that is needed. South African-based investment fund African Rainbow Capital is a participant in a $100-million fund that includes investment in cold-storage facilities in East Africa in its portfolio.
Donald Trump did not pay much attention to Africa when he was president of the US but he was strongly in favour of bilateral, rather than regional agreements so it is surprising that the African Growth and Opportunity Act (AGOA) survived the Trump years. The deal, which gives duty-free access to about 6 500 products from 39 Sub-Saharan countries, is due to expire in 2025.
By then AfCFTA will have been operating for four years and the region’s ability to negotiate as a collective should be stronger. As much as Africa countries’ trade within the continent will grow, exports will remain key to adding value and attracting good prices. Trade between the US and Africa in 2018 was valued at $41.2-billion.
Namibia achieved a breakthrough in 2020 when, after nearly two decades of negotiations, 25 tons of the African country’s beef was shipped duty-free to the US. Under AGOA, Namibia may send the US up to 860 tons of beef but the fact that negotiations took so long points to the fact that the treaty is not a panacea. A possibly even more significant event took place in 2019 when the same producer, MeatCo, a Namibian state-owned entity, exported some meat to China.
Trade finance
In preparation for AfCFTA, development finance institutions and banks have been developing methods of trading in local currencies, rather than hard currencies like the US dollar. The African Virtual Trade-Diplomacy Platform (AVDP) is a private-sector initiative by more than 20 companies (in partnership with the AU Commission) which will support AfCFTA by enabling member states to participate effectively and securely.
Banking groups such as Citi have been investing heavily in digital platforms related to payments infrastructure. Many African traders already do their banking on hand-held devices and so the market is ready for more innovation in taking digital payments further into the world of trade.
Developing reliable cross-border payment platforms will be vital in supporting increased intra-African trade.
ECIC provides export credit and investment guarantees, stepping in where commercial banks might be risk-averse to support private investment.
The European Investment Bank is the investment arm of the European Union and often partners with African institutions.
China has a wide range of financial entities which are active across a range of sectors in Africa. These entities include the China Development Bank (CDB), the China International Trade and Investment Corporation (CITIC), China Export and Credit Insurance Corporation (CECIC), China Export Credit Insurance Corporation (Sinosure) and the China Export-Import Bank.
London: Investing in African Mining Indaba (Mining Indaba), organised by Hyve Group Plc is hosting one of their most popular features online this year. The Investment Battlefield, the platform famed for presenting Africa’s hottest junior mining companies battling against each other begins Tuesday 9th March 2021.
Global investors and financiers are encouraged to tune in to review projects and financial overviews of some of Africa’s most promising mining projects. Providing a way for capital holders to uncover new projects and ideas that were not previously on their radars which takes place weekly, starting with Precious Metals Exploration (9 & 11 March), followed by bulk and base metals (16 & 18 March) and battery and energy materials (23 & 25 March).
Kael O’Sullivan, Director of Investor Relations, Mining Indaba states – “Given the huge success of the Investment Battlefield since it launched in 2017, we wanted to continue this year despite the global pandemic challenges. We believe the format will translate well to the virtual environment of the Investment Programme and once again, prove an integral part of our offering aimed at investors and mining companies. Whether virtually or in-person, we believe it is important for junior mining entrepreneurs to be given the opportunity to gain exposure and build relationships with investors and brokers. It not only allows juniors to receive first-hand feedback from the investors themselves, learn exactly what investors are looking for and how to increase their appeal but also provides an opportunity for juniors to present themselves as leading emerging developers and miners. We are all looking forward to showcasing some of the most promising junior miners in Africa throughout March 2021.”
Next week’s First Stage: Precious Metals Exploration will spotlight companies who are in the exploration stage of their project on Tuesday 9th March at 14:00 (GMT). The junior mining companies include Ingrid Hibbard, President and CEO, Pelangio Exploration, Sean Meadon, Executive Director, Platinum 1 and Christopher Drysdale, Vice President of Operations, Antler Gold. The companies will be presenting to a top panel of judges from OCIM Precious Metals, Elemental Royalties and MJG Capital.
The First Stage: Precious Metals Development will follow on from this on Thursday 11th March at 14:00 (GMT) and pitching companies include Andrew Dinning, Managing Director and CEO, Samara Resources, Shedrack Kombe, CEO, Mcharo-Kombe and Bert Monro, CEO and Director, Cora Gold to Medea Natural Resources, Afena Capital and Triple Flag Precious Metals who form the panel of investor judges.
For the first time, it’s not just the expert panel of judges who will choose the finalists, the audience will be asked to vote on who they think should go through to the next round and go on to be crowned the 2021 champion. Attendance for the first stages is free, click here to register a place in the audience.
The Investment Battlefield will be held in conjunction with the Virtual Investment Programme (launching 30-31 March), a two-day programme of highly targeted and optimised investment meetings for the global mining finance community and junior and mid-tier mining companies. The semi-final and final will be streamed live exclusively to participants of the programme.
For more information on how to join the Virtual Investment Programme, please click here.
The statistics that hover uncertainly around Africa are not ones that should make the continent proud. The World Bank has estimated that Africa could potentially hold 90% of the global poor population by 2030 and has recently cut its economic growth predictions to between -2.1% and -5.1% in 2020 from the 2.4% of 2019.
The situation has been significantly worsened by the global pandemic, as the continent hits its first recession in 25 years. But this is not the picture that defines a continent that has long defied expectation and prediction. In fact, a young population, a growing consumption market, and the rapid movement towards mobile inclusion and connectivity are shifting the conversation. Africa is poised on the cusp of change introduced by mobile and Internet technology.
Africa has undergone a remarkable journey over the past 30 years. It has not only leapfrogged legacy technology and systems into a more relevant future, but it has done so in spite of challenging circumstances. This is particularly relevant when it comes to mobile – the technology, the connectivity, and the financial inclusion.
To date, according to the GSMA 2019 Mobile Money Report, there are more than one-billion mobile money accounts globally that account for 57% of mobile money transaction values. Over the next five years, also according to the GSMA, it’s expected that 84% of Africans will have access to a SIM connection and that mobile payments will play a critical role in empowering individuals, businesses and the economy as a whole.
This is the principle that’s dominating the current approach taken by the World Bank in an effort to provide Africa with much-needed support in the wake of Covid-19. The organisation is focusing on putting women at the centre of digital payment programmes and leveraging digital technologies to improve trade, government and resource management. This underpins the organisation’s focus on national payment systems that are secure, affordable and accessible as these are the tenets that underpin an economy that’s focused on financial inclusion and stability.
Murray Gardiner, Managing Director, Bluecode Africa
African payment solutions are critical to improve the free flow of funds to boost business and economic activity. Payment technology that allows for individuals from all walks of life to manage their money securely is the equivalent of putting a bank into every person’s pocket.
Digital payments equalise engagements while improving transparency and control over finances and business. They also empower small to medium enterprises (SMEs), giving them greater scope for inclusion and access to customers and markets.
This has become particularly true in the current environment. Digital payments are now, more than ever, the key to unlocking business growth on the continent. The rigorous regulations put in place by African countries to minimise the impact of the virus have led to inventive approaches to shopping and living. Digital payment platforms are significantly safer than cash and are increasingly being leveraged by governments and organisations to improve customer access to resources and services.
According to a study released by McKinsey & Company in June 2020, “innovation in payments should be one component of the industry’s response to the crisis”, and this should include promoting awareness of digital payments, partnering with other industries, and introducing new and relevant products.
In Africa, digital payments are more than just keys to open the doorways of financial inclusion, they are increasingly the steps that will take the continent out of recession and into a more dynamic and inventive future. This view is echoed by the investments made by the World Bank and organisations such as SWIFT and Bluecode Africa; programmes such as the African Continental Free Trade Area (AfCFTA), and the International Monetary Fund (IMF).
Investments include cross-border payment platforms, increased commerce capacity, cost management, digital innovation, and the empowerment of individual, micro-enterprise and SMEs. It’s time to educate businesses and individuals as to the costs and risks of cash as opposed to digital, to showcase the value of digital payments in not just opening up new markets and opportunities, but in providing tighter cash flow control at a better price point than cash.
Digital payments are a gateway to more valuable financial services and other value-added merchant services. To effectively compete against cash the digital payment must realise positive externalities that provide exponentially greater value than cash replacement alone.
The continent may not be showered in stunning statistics, few continents are at this point in time, but it is hovering on the edge of a future that has the potential to transform poverty, business and its economy.
About Bluecode
Bluecode is a mobile payment solution that combines cashless payments via smartphones with value-added services and enables payments with merchant and banking apps. Founded in Europe, Bluecode has now expanded into Africa.
Bluecode Africa is taking mobile payments into markets where its value as a technology payment service and scheme can make a significant difference for retailers, SMMEs and in the everyday lives of consumers. Bluecode Africa is focused on driving economic growth in the productive economy by unlocking opportunity and business potential with digital transparency.
The continent’s most developed economy, South Africa, is ready for greater ease in transferring money between customers of different banks. Such an enhancement will mean that those who often face barriers within the local financial system could be brought into the fold.
The country is betting on interoperability with the Rapid Payment Project (RPP). The RPP will bring instant clearing and allow banks, and presumably non-bank financial institutions, the ability to ‘push’ payment clearing messages like instant electronic funds transfers (EFTs) to other financial institutions, facilitating a high volume of low-value instant payments.
This will be transformative for the national payment system (NPS) and will allow for instant clearing and instant access to funds for small merchants. This represents a move towards instant digital ‘push’ payments for consumers, and the market will presumably open up to various last-mile payment technologies to enable choice in the market.
What about cards?
Cards are a ‘pull’ payment where consumers provide authorisation for merchants to withdraw money from their accounts by providing card authorisation information.
Murray Gardiner, Managing Director, Bluecode Africa
This subtle difference has a profound effect. With cards, the merchants’ banks authorise merchants to accept card payments and the banks seek settlements on behalf of those merchants. This infers a close and interdependent relationship between banks and merchants and allows the bank to extend risk-based financial products and services.
The downside of cards includes foreign rules, complex compliance and security requirements that have to do with the legacy technology behind transactions, and associated fraud risk. All the costs of plastic (POS terminals, fraud risk, data privacy compliance, and foreign exchange fees on local currency transactions) limit the reach of card acceptance to the established, more affluent segments of the market.
The best of both worlds
South Africa’s payments ecosystem needs a digital account-based alternative to cards: a mobile digital ‘pull’ open-loop merchant payment that provides the benefit of cards without the inherent costs and constraints.
Additionally, this digital, mobile, open payment needs to have general acceptance, like card payments, but not be dependent on a foreign legacy card scheme.
A digital, mobile account-based merchant payment would increase the size of the addressable market for financial services and create opportunities for banks and aggregators to bring the informal sector into the formal economy. This would benefit consumers and, most importantly, small, medium and micro enterprises (SMMEs), including micro traders, small farmers, artisans, and the myriad sellers of goods and services that make up the informal economy.
For digital mobile merchant payments to scale against cash, there must be a strong value proposition for both the consumer and the merchant. The consumer needs to be able to pay in a consistent way anywhere, irrespective of who the consumer or merchant banks with. For the merchant, payments must be simple, convenient. The merchant should also be able to experience the benefits of access to valued and affordable financial services.
About Bluecode:
Bluecode is a mobile payment solution that combines cashless payments via smartphones with value-added services and enables payments with merchant and banking apps. Founded in Europe, Bluecode has now expanded into Africa.
Bluecode Africa is taking mobile payments into markets where its value as a technology payment service and scheme can make a significant difference for retailers, SMMEs and in the everyday lives of consumers. Bluecode Africa is focused on driving economic growth in the productive economy by unlocking opportunity and business potential with digital transparency.
Tanzania-Zambia Railway Authority, popularly known as TAZARA, is a bi-national railway linking the Southern Africa Regional transport network to Eastern Africa.
A large number of presidential and general elections were held and although there were a few instances of leaders wanting to hang on for third terms and by so doing, making enemies of opposition forces and constitutionalists, a significant milestone was achieved when Malawi’s constitutional court threw out the results of the 2019 presidential elections and ordered another election to be held.
That election was held in June 2020 and led to a new president being elected, Lazarus Chakwera winning 58.5% of the vote against the incumbent Peter Mutharika. If this is the harbinger of an increased respect for the rule of law, Africa’s chances of progressing in other fields will be improved.
Another milestone will be achieved in 2021 when Niger’s current president stands down at the end of his term, allowing for a first peaceful transfer of power under a relatively new constitution.
Altogether, African governance has not advanced to the degree that was expected five years ago. The 2020 Ibrahim Index on African Governance (IIAG) reports that progress has slowed in improving governance on the continent, even though fully 60% of Africans live in places which were in better shape in 2019 than they were in 2010. The 2020 report is based on data gathered in 2019.
The 2021 election in Uganda will be watched very carefully. President Yoweri Museveni has been in power since 1986 and shows no signs of wanting to retire but Robert Kyagulanyi, a popular musician who goes by the stage name of Bobi Wine, has been gathering tremendous support in the face of several detentions and restrictions. Eighty percent of Uganda’s population is under the age of 30.
Other serious obstacles to citizens being able to exercise their right to vote were experienced in the Central African Republic, where rebels made the 2020 election a fraught affair, and in Guinea, where violence during and after the elections led to dozens of deaths.
The new president of the Seychelles has been nothing if not persistent. Wavel Ramkalawan’s successful bid for the presidency was his sixth attempt to attain the nation’s highest office. Seychelles is ranked third on the IIAG Index, behind Mauritius and Cape Verde. The rest of the top 10 is made up of Tunisia, Botswana, South Africa, Namibia, Ghana, Senegal and Morocco. Gambia showed the most improvement in 2019 and South Sudan and Somalia are at the bottom of the table.
De Beers’ Jwaneng mine in Botswana produces a quarter of the world’s annual diamond supply by value . Credit: De Beers
Mixed messages
The first day of 2021 brought good news for Africa – that the continent’s first comprehensive free trade agreement had come into operation – but it was sorely needed to balance some of the big events that characterised 2020.
Chief among these was Covid-19 but bad politics and increased violence contributed to a sense that many of the gains of recent years cannot be taken for granted. The two areas that best illustrate the fragility of progress are Ethiopia and Mozambique.
In 2019 the prime minister of Ethiopia, Abiy Ahmed, was awarded the Nobel Peace Prize for restoring relations with neighbouring Eritrea and beginning a series of bold internal reforms. A decision to postpone elections because of Covid-19 sparked anger in the northern region of Tigray and the last months of 2020 were spent with the country engaged in civil war.
The discovery of vast reserves of liquid natural gas off the coast of Mozambique has attracted huge investments from several international energy companies. However, the government’s inability to provide security against insurgents in the Cabo Delgado province has put those investments at risk.
In December, the Export-Import Bank of Korea announced $500-million worth of financing for the Mozambique Offshore Area 1 Project but the same month brought news of towns being evacuated because of insurgent activity. So far, there has been no talk of international or regional peacekeeping forces, but that will surely come up sooner rather than later.
The central Sahel region also had a turbulent 2020. The area along the boundaries that divide Burkino Faso, Mali and Niger has been at the centre of violent attacks by Islamist and ethnic militias which, according to The Economist, displaced 1.7-million people and led to an average of 3 000 people per day having to flee their homes. The UN has peacekeeping forces in the area and both the US and France have troops deployed there to assist local government forces.
The size of Africa’s population (currently estimated at 1.2-billion) represents both opportunity and challenge. The continent by 2030 will increase the number of children in primary school from 189-million to 251-million and by 2050 Africa will record 42% of all global births (UNICEF).
The upside of this is that huge markets for goods will be created but housing, education and healthcare will have to expand. As things stand, about 120-million Africans are unemployed and about 40% of the population live below the poverty line ($1.25).
Urbanisation is already happening at a fast pace. This is another opportunity and a further challenge. The fact that Africa is arriving somewhat later in the digital age is an advantage because there are opportunities to leapfrog technologies. This is happening in mobile banking, where mobile telephones are delivering financial services across the continent.
Integration and trade
Africa has introduced a free trade agreement. In 2018 the African Continental Free Trade Area (AfCFTA) agreement was signed by 49 countries, making it one of the most comprehensive and potentially influential agreements ever signed on the continent. Since then, all but one country has signed the agreement and it officially came into effect on 1 January 2021.
The Port of Durban handles containers, automotive imports and exports, break-bulk and agricultural commodities (Credit: TNPA)
Although no-one expects that the agreement will immediately lead to borderless trade with no tariffs, there is great symbolic importance in the implementation of the agreement. Problems remain with the movement of people and certificates of origin, and the more likely trend will be for regional economic communities (RECs) and large countries within RECs to accelerate steps towards integration. Large infrastructure projects such as rail and energy corridors that traverse the continent could be game-changers.
Regional corridors are intended to boost intra-African trade. The North-South Corridor in the Southern African region runs through 26 countries and ends at the Port of Durban. Ten corridors are being developed across the continent to make the movement of goods easier and to improve access to ports.
Central to future of the AfCFTA is the degree to which African states and regions can integrate. A first Africa Regional Integration Index was published in 2016 and a second (ARII 2019) was published by the Economic Commission for Africa (ECA), the African Development Bank (AfDB) and the African Union Commission (AUC).
The report’s conclusion is that a great deal still needs to be done to integrate regional economies, with the average country score being recorded as 0.327 out of 1. Even the most integrated country, South Africa, scored just 0.625 out of 1.
Scores are allocated across five areas: trade, productive capacity, macroeconomic policy, infrastructure, and free movement of people. The index also covers intellectual property, competition policy, investment and digital trade which are critical to the successful negotiations of Phase II and III of AfCFTA. By allocating scores, the index allows progress to be plotted.
In early 2020, the Development Bank of Central African States (BDEAC) made progress on integration by signing off on projects worth $213-million for Cameroon, Congo, Gabon and Equatorial Guinea. The linking of the electrical grids of Equatorial Guinea and Gabon are the two most obvious integration-themed projects but others in the fields of agro-industry and microfinance are also relevant.
Tanzania-Zambia Railway Authority, popularly known as TAZARA, is a bi-national railway linking the Southern Africa Regional transport network to Eastern Africa. The Southern African Development Community (SADC) has been active with multimodal projects such as the development corridors of Nacala, Maputo and Lobito (Zambia to Angola).
There are many infrastructure investment opportunities that can boost trade. Among the initiatives of the Programme for Infrastructure Development in Africa (PIDA) is the West Africa Hub Port and Rail Programme, a regional hub-port, rail-linkage and port-expansion plan. Kenya’s $68-million Naivasha Dry Port project supports this plan.
Investing in infrastructure
The African Union’s Agenda 2063 lays out ambitious goals for the continent. The flagship projects designed to achieve these goals cover infrastructure, education, freedom of trade and movement of people, arts, culture and technology. The projects are:
Integrated high-speed train network
Formulation of an African commodities strategy
Establishment of the African continental free trade area (AfCFTA)
The African passport and free movement of people
Silencing the guns by 2020
Implementation of the Grand Inga Dam (hydropower) Project
Establishment of a single African air-transport market (SAATM)
Establishment of an annual African economic forum
Establishment of African financial institutions
The pan-African e-network
Africa outer space strategy
An African virtual and e-university
Cybersecurity
An African virtual and e-university
Great African museum
Encyclopaedia Africana
The African Development Bank Group comprises the African Development Bank, the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). The AfDB is a key funder of infrastructure projects and has set itself a set of goals known as the High Five: light up and power Africa; feed Africa; industrialise Africa; integrate Africa; and improve the quality of life for the people of Africa.
The bank’s African Economic Outlook 2019 highlights energy and infrastructure as key areas for investment. If Africa is to prosper, infrastructure has to be improved and built.
Namdock’s repair facility at Walvis Bay. Credit: Namdock
The Emerging Africa Infrastructure Fund (EAIF), which forms part of the Private Infrastructure Development Group (PIDG) and is managed by Ninety One, encourages and mobilises private investment in infrastructure. PIDG is funded by donors from seven countries (UK, Switzerland, Australia, Norway, Sweden, Netherlands, Germany) and the World Bank Group.
Power plants in Togo, Ivory Coast and Uganda are typical examples of the types of projects supported by the EAIF. Having been involved in the establishment of a first fertiliser plant for Indorama Eleme at Port Harcourt in Nigeria, the fund is now also a participant in a $1.1-billion expansion project which will double the company’s annual output to 2.8-million tons.
South African firm Futuregrowth Asset Management manages the largest debt fund of its kind in Sub-Saharan Africa, the Futuregrowth Infrastructure and Development Bond Fund, which has a market value of more than R15-billion.
On the energy front, one of the AfDB’s projects, the Desert to Power Initiative in the Sahel region, will bring power to 250-million people who were previously unconnected.
One way of fast-tracking the provision of energy to remote regions is through mini-grids. Recognising that raising funds for mini-grids can be tricky, the AfDB has approved a $7-million grant from the Sustainable Energy Fund for Africa (SEFA) to create a funding infrastructure for a sector that is in growing despite the challenges. The Africa Minigrid Developers Association (AMDA) comprises 29 private companies that are active in rolling out minigrids in 12 countries.
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The mining sector still makes a big contribution to provincial GDP although that percentage is now below 30%. About 18% of total employment in the province is in mining.
