Lateral Frontiers
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Lateral Frontiers

From trade deals to new ports, Lateral takes a look at recent developments
that should facilitate trade across the continent.

From our August 2019 newsletter issue. You can subscribe here.

Thoughts & Themes

Africa open for business
In a month where we have seen the UK government select a pro Brexit prime minister and the trade war between China and the United States continues to escalate, we take a closer look at Africa’s own initiative to boost its share of global trade and increase intra-continental commerce.

  • Nigeria joins the Party. The Africa Continental Free Trade Agreement (AfCFTA) was signed in May 2019. In theory it would bring all 54 members of the African Union (AU) together as a single market of 1.2 billion people by removing trade barriers such as tariffs across Africa thereby boosting regional trade and allow companies to expand and enter new markets. The United Nations Economic Commission for Africa (UNECA) predicts the trade deal could boost to Intra Africa trade by 52% by 2022.
  • One notable exception from the list of signatories was Nigeria, the continents largest economy and most populous country. Nigeria was initially worried that by exposing its manufacturers to greater competition, the deal could force some of them out of business and drive up unemployment. Following a lengthy review the economic powerhouse has joined the party. Today 53 out of 54 countries have signed up with Eretria being the only hold out (hold your breath)
  • Whilst we at Lateral see AfCTA as a positive move we are cognizant of the fact that the forecasted boost to growth highlighted above is based on some yet unproven assumptions laid out in a 2012 report which assumed a fully-liberalised and continent-wide trade area by 2017; harmonisation of external tariffs across the continent by 2019; and a series of practical trade facilitation measures by 2019. As such we do not anticipate the full projected benefits of AfCTA for another decade. We hope policy matters also continue to focus on less ambitious but more advanced regional integration such as the EAC and COMESA.
  • One agreement to rule them all. Enter Uncle Sam. U.S. Assistant Secretary of State for African Affairs Tibor Nagy stated the US’s preference for signing bilateral trade contracts with African countries whilst the African Union Trade and Industry Commissioner Albert Muchanga said the AU favors a free-trade agreement with the U.S. to replace the African Growth and Opportunity Act. “To replace AGOA, we would like to see an agreement between the whole of Africa and the U.S.,” Muchanga said in an interview at the forum in Abidjan. Africa should negotiate with “one voice” for a new trade pact after 2025, he said.
  • Current US /Africa agreements have not been particularly effective. The value of trade between the U.S. and sub-Saharan Africa was $41.2 billion last year, making the U.S. the region’s third-largest trading partner. Trade with China was worth 3.5 times more.
  • Coming to a port near you. A race to roll out bold new port infrastructure to facilitate trade has kept African governments busy. In July Morocco opened a new terminal at Tanger Med port allowing it to surpass the Mediterranean’s largest ports Algeciras and Valencia in terms of container capacity, and drive more investment and manufacturing to the country. On 5 August, Gabon secured US$341mn funding to expand capacity at its Owendo port in the capital Libreville. On the same day, Namibia launched a US$268mn expanded container terminal at its main port of Walvis Bay. Also this month Tema Port in Ghana docked its first commercial vessel after 3 years of expansion and modernization works to complete the first two berths. Finally in Kenya four state heads; President Uhuru Kenyatta (Kenya), Yoweri Museveni (Uganda), Felix Tshisekedi (Congo) and John Magufuli (Tanzania) will launch the Sh3 billion Kisumu port.

What Caught our Attention

  • Keep on trucking: Nigerian logistics start-up Kobo360 raised $20M backed by Goldman Sachs. An additional US$10 million in local currency working capital financing has been secured from Nigerian commercial banks. The investment will be used to help Kobo360 continue to scale, develop its technology offering and accelerate supply growth.
  • Venture backed logistic business builds out leadership team: This month Kenya-based logistics startup Lori Systems has announced the appointment of Uche Ogboi as the company’s Chief Operating Officer (COO) and Efayomi Carr as Head of Strategic Finance effective 29 July 2019.
  • Ogboi served as Principal, Investments, at EchoVC Partners, a Pan-Africa and tech-enabled venture capital firm, where she helped to grow the firm’s portfolio both across the region and globally. She has invested in companies across various sectors, including logistics, healthcare, fintech, telecoms and agriculture.
  • Carr joins Lori from Quona Capital, where he served as Senior Associate supporting investments across Africa. Before Quona, Efayomi worked with 8 Miles LLP, a London-based private equity firm that invests in Africa. He has also worked with the Boston Consulting Group in New York and Nigeria covering financial services and at Jumia as the Head of Marketplace for Nigeria in Lagos.
  • African Fintech company facilitates Sino African Trade:This month African payment company Flutterwave announced its partnership with Alipay of China, thereby opening up Africa’s market to Chinese consumers.
  • The partnership enables Flutterwave, a Nigerian-founded B2B payments service primarily for companies in Africa, to accept payment from customers on the continent and abroad and leverage Alipay’s global network of more than one billion active users, per Alibaba’s latest earnings report.
  • Earlier this month, Pan-African payment company Wapi Pay said that it plans to accelerate uptake of Wechat Pay and Alipay in the African continent in order to boost Sino-Africa trade.
  • One of the biggest facilitators on trade is seamless payments, and we at Lateral see such partnerships as another important step in boosting cross border trade.

Lateral Matters

Lateral does Lagos

In the spirit of Pan African collaboration, the Lateral Capital team came in force to support our West African lead Ochuwa Akhigbe-Ogionwo at a Lateral Capital Lagos sponsored eco-system event. The event was attended by key ecosystem stakeholders at the Capital Club, Lagos on 18th July 2019.

Topical issues explored include:
- What investors look for in start-ups
- How start-ups can partner with corporates,
- Challenges faced by founders
- Understanding team dynamics and fundraising.

Speakers included Etop Ikpe (CEO, Cars45), Rolayo Akhigbe (SVP and Divisional Head, Transaction Banking at FCMB), Adia Sowho (CEO, Mines.io) and Oluseye Soyode Johnson, (Innovation Expert, Ericsson)

More to come

If you found this month’s focus on trade interesting, then stay tuned for our deep dive into the Tech and African logistic space later this quarter. Briter Bridges and Lateral Capital are joining forces to develop a report about the state of innovation in the logistics sector across Africa. The study builds upon primary and secondary research to examine the key opportunities and challenges faced by companies in the ecosystem. Over 40 leading logistics-tech startups from Cairo to Cape Town were surveyed and 10+ underwent in-depth interviews to help identify the key trends in the industry. The report also contains the 2019 update to Briter’s Logistics Innovation Maps.

Best,

Samakab Hashi — Nairobi

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