Addressing the Financing Gap

Trade finance is crucial for local businesses seeking to import essential commodities and equipment necessary for scaling African economies. However, many businesses in frontier markets face immense challenges in securing funding due to high-risk perceptions among financial institutions and relatively lower trade volumes. This partnership aims to alleviate these difficulties by providing essential financial support through local banks in African countries.

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Under the Master Risk Participation Agreement (MPRA), BII will facilitate the $50 million facility, enabling GHIB to extend its lending capabilities. This initiative not only addresses the existing credit gap but also seeks to bolster trade flows within the participating nations.

Economic Impact and Job Creation

The implications of this partnership are extensive, with an expected multiplier effect across various facets of the economy. By enabling businesses to import vital goods and equipment, the initiative is anticipated to create jobs, enhance productivity, and ultimately drive economic growth within these regions.

According to research cited by GHIB, for every dollar of trade generated, approximately $1.30 is added to GDP. This figure highlights the potential economic expansion that could result from the successful implementation of this trade deal. With improved access to finance, businesses will not only be able to sustain their operations but also innovate and expand their market reach.

Challenges

Despite the benefits, several challenges persist. Investors are often hesitant to engage with frontier markets due to perceived high risks, including political instability and limited financial infrastructure. Local businesses also face significant hurdles, such as restricted access to financial services, underdeveloped trade infrastructure, and cultural barriers, which hinder their ability to obtain credit and expand operations. These obstacles can create liquidity issues, making it difficult to deploy financial resources effectively and underscoring the need for tailored solutions.

Solutions

To overcome these challenges, BII and GHIB can implement strategies such as risk mitigation through insurance and local partnerships, capacity building for local banks to enhance lending capabilities, and investment in infrastructure to improve trade efficiency. Additionally, tailoring financial products to meet local needs and collaborating with stakeholders to enhance liquidity can further support businesses. By adopting these solutions, BII can effectively deploy its $50 million facility, reduce perceived risks, and increase investment opportunities in these markets.

A Strategic Partnership

GHIB’s leadership has underscored the strategic significance of this partnership with BII. “This partnership with British International Investment represents a viable path through which we can structure partnerships that leverage our deep knowledge of risk into profitable and impactful transactions,” stated Adansi, a leadership representative of GHIB. He emphasised the importance of harnessing BII’s financial capacity and market insights to develop realistic and actionable trade solutions.

By combining GHIB’s in-depth understanding of local markets with BII’s broader financial scale, this initiative aims to create a robust infrastructure that can support and transform local economies.

The collaboration between British International Investment and Ghana International Bank marks a pivotal step towards enhancing trade finance in seven African nations, addressing critical gaps and challenges faced by local businesses. With a focus on increasing access to finance, fostering economic growth, and creating job opportunities, this initiative is set to generate significant positive outcomes across the participating countries. As the partnership progresses, it stands to serve as a model for future collaborations aimed at driving sustainable development and economic resilience in Africa.

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Africa’s economic dynamism has made it a pivotal player in the Global South coalition. Recent initiatives, such as South Africa’s presidency of the G20, have positioned the continent as a bridge between emerging markets and established economic powers. The Development Bank of Southern Africa underscores the significance of these efforts, noting that African nations are championing dialogues on sustainable development, climate change, and equitable trade practices.

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Economic Transformation

Africa’s evolution from resource dependency to innovation-led economies symbolises a remarkable paradigm shift. Countries like Kenya, Nigeria, and Senegal have become tech hubs, hosting start-ups that address local challenges with global implications. For instance, Kenya’s M-Pesa platform revolutionised financial inclusion, inspiring digital payment systems worldwide. Meanwhile, Nigeria’s fintech industry has attracted over $600 million in investment annually, according to McKinsey & Company.

Agriculture, long the backbone of African economies, is undergoing a renaissance driven by technology. Smart farming techniques and agri-tech innovations have increased productivity and bolstered food security. Rwanda’s efforts to digitise farming practices have resulted in a 25% increase in crop yields since 2020, illustrating how technology can revolutionise traditional sectors.

Infrastructure remains the lifeblood of Africa’s economic growth. The African Union’s Agenda 2063 underscores ambitious projects like the African Continental Free Trade Area (AfCFTA), aimed at integrating a market of 1.4 billion people. The AfCFTA, expected to increase intra-African trade by 52% by 2025, reflects the continent’s commitment to creating a unified economic bloc.

Flagship infrastructure projects, including Ethiopia’s Grand Renaissance Dam and Senegal’s Dakar-Diamniadio Toll Highway, symbolise Africa’s determination to overcome logistical challenges and harness its natural resources effectively. According to the African Development Bank, investments in infrastructure could add up to 2% to Africa’s annual GDP growth by 2030.

Harnessing the Power of Partnerships

Africa’s collaboration with other Global South nations has amplified its voice in international forums. Partnerships with China, India, and Brazil have driven investments in renewable energy, technology, and manufacturing. China alone has committed over $300 billion in infrastructure projects across Africa, while India’s trade with the continent exceeded $90 billion in 2023.

The growing emphasis on South-South cooperation is reshaping the geopolitical landscape, enabling Africa to negotiate better terms for trade and investment. Initiatives like the India-Africa Forum Summit and the Forum on China-Africa Cooperation have reinforced this dynamic, fostering mutual growth.

Challenges on the Horizon

While Africa’s ascent is noteworthy, challenges persist. Climate change, political instability, and inadequate access to education and healthcare remain formidable barriers. The continent’s youthful population, while a potential asset, also poses a risk if job creation does not keep pace with demographic growth.

Corruption and bureaucratic inefficiencies continue to hinder progress. According to Transparency International, Africa loses an estimated $50 billion annually to illicit financial flows, funds that could otherwise be channelled into development initiatives.

A Vision for 2030 and Beyond

To sustain its momentum, Africa must adopt a multi-faceted approach:

Investing in Education and Skills Development: Empowering its youth with relevant skills can transform Africa’s demographic bulge into a dividend. Initiatives like Rwanda’s coding academies and Nigeria’s tech hubs are steps in the right direction.

Accelerating Green Growth: Africa holds 60% of the world’s solar energy potential. Countries like South Africa and Morocco are already leading the charge with large-scale renewable energy projects. By harnessing this potential, Africa can not only achieve energy security but also lead global efforts in combating climate change.

Strengthening Governance and Transparency: Addressing corruption and fostering institutional reforms are crucial for attracting foreign investment and ensuring equitable distribution of resources.

Africa’s New Dawn

Africa’s journey to becoming the vanguard of the Global South is not just a tale of economic growth but a testament to its resilience, innovation, and ambition. Like the Baobab tree, deeply rooted yet reaching skyward, Africa’s economic renaissance symbolises strength, adaptability, and boundless potential.

As the continent continues to write its growth narrative, it serves as an inspiration for the Global South, proving that sustainable development is not just a goal but an achievable reality. The world is watching as Africa leads the way—not as a follower, but as a trailblazer.

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The region’s music industry, in particular, is undergoing a remarkable transformation. The 1990s and early 2000s witnessed the rise of francophone music, which has since gained significant global traction.

In recent years, French-speaking African music has experienced a resurgence, captivating international audiences with its unique fusion of beats, melodies, and meaningful lyrics. Artists such as Fally Ipupa, Koffi Olomide, Angélique Kidjo, and Aya Nakamura are blending traditional African sounds with contemporary influences, earning widespread recognition beyond the continent.

According to the research firm Dataxis, revenue from African music streaming is projected to more than triple in five years, increasing from $92.9 million in 2021 to $314.6 million by 2026. Musicians from francophone countries are poised to capitalise on this growth, using streaming platforms to reach wider audiences and build international careers.

The diversity of French-speaking African music is not only reflected in its sound but also in its rich cultural heritage. A wide range of influences, from the rhythms of North Africa—such as those found in Tunisia and Morocco—to the sounds of Ivory Coast, Congo, Benin, Mali, and the French Caribbean islands of Guadeloupe and Haiti, contribute to its global appeal.

It is clear that Francophone Africa’s music scene is well on its way to becoming a major force in the global industry. With its distinctive sound, a wealth of talent, and a growing digital footprint, Francophone Africa is set to captivate audiences worldwide and secure its place on the global stage.

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The continent could be well-suited for a common currency when considering the nature of supply shocks that the region experiences. The African economy, comprising 54 nations, was projected to be around US$2.7 trillion in nominal terms in 2021, according to Africa the Statistics Times. Africa’s growth has been influenced by commodity prices; the continent holds a third of the planet’s mineral resources, 10% of the world’s oil reserves, and produces nearly 70% of the global diamond trade.

Historical Context

The idea of a single African currency gained momentum with leaders like the late Libyan leader Muammar Gaddafi, who was a strong advocate for the “Gold Dinar.” This proposed currency aimed to replace the US dollar and Euro in African transactions, thereby reducing Western influence and promoting African economic independence.

Gaddafi’s vision was based on creating a gold-backed currency that would unify Africa economically, potentially leading to a continent-wide banking system independent of Western financial institutions. However, his ambitions faced resistance from Western powers, who feared the potential impact on the global economic order.

President Nana Akufo-Addo of Ghana has expressed support for the Eco, a proposed common currency for the West African Economic and Monetary Union (WAEMU). He views it as a stepping stone towards broader continental integration, highlighting the potential benefits of a unified economic zone.

Similarly, President Alassane Ouattara of Côte d’Ivoire has also shown enthusiasm for the Eco, believing it could enhance economic stability and growth in the region. Additionally, President Paul Kagame of Rwanda has emphasised the need for stronger economic unity in Africa, including the possibility of a single currency as part of the continent’s broader integration efforts.

The Journey of Implementation

The CFA franc is a single currency used by eight independent states in West Africa, which make up the West African Economic and Monetary Union: Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo.

After decades of negotiations, fifteen countries in West Africa have agreed to adopt a single currency by 2027 called the ECO. The joint currency has been in development for 30 years, with the Economic Community of West African States (ECOWAS) announcing that the rollout will be gradual.

The move will see countries meeting the established criteria joining first, with the eight member states that currently use the CFA franc, which is backed by France, being closely monitored. Although experts are divided on the impact the ECO will have on the region’s economy, with some predicting benefits and others warning of potential risks.

Professor Lumumba P. L. O. (Kenya) argues that a single currency would strengthen Africa’s bargaining power globally and reduce dependence on foreign currencies. He believes it would facilitate easier intra-African trade and cooperation, marking a crucial step towards true African integration.

The Eurozone’s Single Currency vs. Africa’s Potential Unified Currency

The European Union’s experience with the Euro offers valuable insights into the potential outcomes of a unified currency in Africa. The Euro, introduced in 1999, facilitated trade across the Eurozone, eliminated exchange rate risks, and strengthened the EU’s global economic influence. However, the Eurozone also faced significant challenges, particularly during the Eurozone debt crisis.

Africa’s integration is still in its early stages, and a unified currency would require decades of economic and political integration. The African Union (AU) and regional economic communities like ECOWAS are working towards deeper integration, but political and economic diversity remains a significant barrier.

The Eurozone’s success was built on economic convergence, with similar levels of inflation, interest rates, and fiscal policies. In contrast, Africa is characterised by significant disparities in economic development, making it challenging to implement a unified currency. Nigeria and South Africa are economic powerhouses, while others have smaller, less diversified economies. Harmonising economic policies across these vastly different economies would be a substantial hurdle.

The introduction of the Euro involved a transfer of monetary sovereignty to the European Central Bank (ECB), which was crucial for managing the Euro. However, in Africa, ceding monetary control to a continental institution may face resistance. Countries with strong currencies or those benefiting from currency autonomy may be reluctant to relinquish control to a central African bank. This highlights the importance of addressing concerns around sovereignty and monetary policy in any attempt to implement a unified currency in Africa.

Projections and Possible Outcomes

If Africa were to successfully implement a unified currency, the potential benefits could be significant. Intra-African trade could see a substantial boost, as currency exchange costs and risks would be eliminated. This could lead to greater economic integration, making the African Continental Free Trade Area (AfCFTA) more effective. Additionally, a unified currency could enhance Africa’s bargaining power in international trade and finance, reducing its dependency on external currencies like the US dollar and the Euro.

Dr. Kingsley Moghalu (Nigeria), former Deputy Governor of the Central Bank of Nigeria, highlights the potential for a single currency to ease trade barriers, promote economic growth, and reduce currency exchange costs. This could enhance the competitiveness of African economies globally, making it an important step towards African economic integration.

However, the challenges are equally daunting. The success of such a currency would depend on achieving economic convergence, building robust institutions, and securing the political will to implement necessary reforms. The process would likely be gradual, starting with regional currencies like the Eco and eventually moving towards a continental currency.

As quoted by Dr. Vera Songwe (Cameroon), an economist and former Executive Secretary of the UN Economic Commission for Africa, a single currency could enhance regional trade and financial integration, particularly within blocs like ECOWAS. While economic structures vary widely, the long-term benefits of reduced transaction costs and increased financial stability could outweigh the initial challenges.

The experience of the Eurozone provides both a model and a cautionary tale, highlighting the need for careful planning and strong institutions. Africa’s diverse economies and political landscapes make the path to a single currency complex, but with concerted efforts, it could become a reality, bringing significant economic benefits to the continent.

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One of the most immediate and devastating impacts of the heat wave was on agriculture. Africa’s predominantly agrarian economies heavily rely on rain-fed agriculture, making them particularly vulnerable to erratic weather patterns. Prolonged heatwaves can lead to droughts, crop failures, and diminished livestock productivity, exacerbating food insecurity and threatening livelihoods. Small-scale farmers, who constitute a significant portion of the population, bear the brunt of these adverse effects, facing diminished harvests and reduced incomes.

A recent study found that a scorching heatwave in West Africa during February was amplified by human-caused global heating, making it 4 degrees Celsius hotter and 10 times more likely. While the exact toll in terms of early deaths or illnesses remains unknown due to underreporting, millions have been affected. The heatwave, occurring in the continent’s largest region, further weakened crops already damaged by extreme rainfall in December, leading to soaring food prices.

The scorching temperatures exacerbated health risks, especially in regions with inadequate access to healthcare and limited infrastructure. Heat-related illnesses such as heatstroke, dehydration, and cardiovascular complications became more prevalent, posing a significant threat to vulnerable populations, including children, the elderly, and those with pre-existing health conditions.

In urban areas, where concrete structures and limited green spaces aggravated the urban heat island effect, the risk of heat-related illnesses was further heightened. Despite warnings from meteorological organizations in Nigeria and Ghana, many affected countries lacked adequate planning for the dangerous heat. The February heatwave, occurring early in the year, caught many unprepared.

The heatwave also worsened water scarcity, as higher temperatures accelerate evaporation rates and deplete water sources. Communities dependent on rivers, lakes, and groundwater for their water supply currently face increased hardship, with women and girls often bearing the burden of traveling long distances to secure water for their families.

Decreased agricultural productivity, coupled with increased healthcare costs and infrastructure damage, places a significant strain on already fragile economies. Moreover, industries such as tourism, which rely on favorable weather conditions, suffer as extreme heatwaves deter visitors and disrupt outdoor activities.

International climate research organizations determined that without climate change, such a heatwave would have been a rare event, happening less than once a century. They emphasized the deadly consequences of extreme heat, especially for vulnerable populations such as the elderly, those with health conditions, and outdoor workers. Pointing that the need for adaptation to climate change is urgent. Yet funding falls short. While wealthy nations can offer support, reaching net-zero emissions remains the ultimate goal to mitigate such crises.

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It is also meant to empower women and girls in the country.

This is the second development policy operation to finance reforms aimed at improving Benin’s potential for strong and inclusive growth, particularly focused on reinforcing women and girls’ active participation in social and economic life.

World Bank disclosed this in a statement made available to newsmen.

Part of the statement reads, “These reforms will help among other things for the Girls to complete their secondary school through life skills education, free access to school in priority areas, the removal of barriers to access sexual and reproductive health services as well as strengthening mechanisms to prevent gender-based violence.

“The program will also support actions to strengthen the resilience of the electricity distribution network, lower expensive connection fees, and introduce new energy efficiency legislation. It will also enable Benin to complete its fiscal policy reform and ensure effective debt management.”

Also, the World Bank’s Operations Manager for Benin, Atou Seck confirmed this in an interview.

He said, “Benin has made significant progress in empowering women and girls through courageous reforms undertaken by the government. These reforms are undoubtedly helping to unleash the potential of millions of women and girls who could not exercise their power to actively participate in social and economic life.

“This financing will enable the country to scale up the reforms necessary for the structural transformation of the economy and the well-being of the population.”

In 2021, Benin adopted important legislative reforms for the empowerment of women and girls. Specifically, the government adopted laws and decrees to promote access to sexual and reproductive health and rights, strengthen the criminalization of gender-based violence, and strengthen the national entity responsible for advocacy, monitoring, and support of gender-related reforms. Gender-based crimes referred to the justice system (as a percentage of the total received) increased from 12.1 per cent in 2020 to 13.7 per cent in 2021.

In the energy sector, reforms have focused on the establishment of an appropriate institutional and regulatory framework to increase private participation in the energy sector, particularly in renewable energy, and the adoption of the National Energy Efficiency Policy.

In his remarks, the Minister of State, Minister of Economy and Finance, Romuald Wadagni said, “The structural reforms underway in the energy sector will significantly increase access to electricity for the Beninese population, particularly in rural areas, by making electricity distribution less expensive and more resilient to climate shocks.

“These reforms are necessary to improve the potential for higher and more inclusive growth, especially since they create the conditions for private investments.

“This operation will help strengthen Benin’s progress towards an upper middle-income economy.”

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The decision will enable an immediate disbursement of $143 million, which Benin authorities intend to use for budget support, the IMF said.

Like other countries in the region, Benin’s economy has been battered by global shocks including the coronavirus pandemic, the war in Ukraine, and increasing attacks by Islamist militants in the north of the country.

“Benin faces significant headwinds from a deteriorating security situation at its northern border, COVID-19-induced scars, the war in Ukraine, as well as significant climate risks, which could erode hard-won economic gains in recent years,” the IMF said.

“The programme is calibrated flexibly to accommodate large spending needs in the near term; it then pivots to revenue-based fiscal consolidation starting in 2023 to ensure medium-term debt sustainability,” it added.

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“This will be an official reciprocity visit by President Kaljulaid,” spokeswoman Mailin Aasmäe said. “The president of Benin, Patrice Talon, was one of the first heads of state to visit Estonia after the inauguration of President Kaljulaid. It is also the first-ever official visit by the Estonian head of state to Africa.”

Kaljulaid will be in Benin from 4 to 7 December.

Her visit will focus on the presentation of Estonian e-government solutions as well as the promotion of Estonian IT companies and cooperation with them. According to Aasmäe, another objective is the Estonian campaign for a non-permanent seat on the United Nations Security Council.

Kaljulaid will be accompanied by a business delegation made up of representatives from ICT companies as well as the e-Government Academy.

The president of Benin visited Estonia in December 2016 shortly after Kersti Kaljulaid became president.

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It was also learnt that the countries made the payment through their respective power firms, with NIGELEC of the Republic of Niger paying $3.79m, while the Community Electric du Benin of the Republic of Benin remitted $6.32m to Nigeria’s electricity market.

In July, President Muhammadu Buhari had decided to join operators in the power sector in calling on international customers receiving electricity from Nigeria to either pay their bills or be disconnected. Nigeria sells power to the Republics of Togo, Niger and Benin, and classifies the West African countries as international customers.

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Benin stepped up security patrols and roadblocks and increased border security on Saturday in the face of a threat from Islamist militants, the army chief of staff and a senior security official said.

A statement by the army chief of staff gave no details of the threat.

West African countries are increasingly concerned about al Qaeda in the Islamic Maghreb and its allies. The groups have expanded a campaign in northern Mali in the last year to stage high profile attacks in Mali, Burkina Faso and Ivory Coast.

At the same time, Islamist militant group Boko Haram, which is based in the northeast of Benin’s eastern neighbour Nigeria, has killed thousands in an insurgency that began in 2009. It has also launched deadly attacks in Niger, Cameroon and Chad.

By Reuters

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