The Next Wave

The Next Wave: After this, AfCFTA what?

By Victor Ekwealor Aug 17, 2020

Container ship loading and unloading in deep sea port at sunset, Aerial view of business logistic import and export freight transportation by container ship in open sea.

In recent years, African countries have become very territorial and begun obsessing over ownership and control of businesses in their domains.

As important as this is for proper accountability, taxation, and keeping African businesses “in the family”, this discussion is very nuanced in multiple ways.

Today, our obsession with this control is; How much is too much?, and other very important questions.

It also does not help that most of these measures are directly affecting Africans that they are supposed to protect.

Catch up on previous editions of The Coronavirus Weekly Newsletter and editions of its iteration; The Next Wave.

Let’s dive in.

The fineprints of ownership
From now, before you start an ICT business – aka startup – in Kenya, you must be willing to cede 30% stake in that venture to Kenyan citizens.

This was stipulated by the Kenyan National Information Communications and Technology Policy Guidelines
2020.

Reporting on the policy, The Standard says:

“..foreign companies will be given three years to meet the local equity ownership threshold, and may apply to the CS for a one-year extension with appropriate acceptable justifications. For listed companies, the equity participation rules will conform to then extant rules of the Capital Markets Authority.”

In the government’s
defence, this policy is geared towards ownership.
A Partech Africa report said that African tech companies raised $2.02 billion in equity in 2019, and $564 million of this went to Kenya; quarter of the whole, and a huge chunk.

Any forward-thinking government will ensure its citizens are benefiting from this new trend. In light of a lot of recent debate around foreign ownership and leadership of Kenya’s tech ecosystem, this is a laudable move.

Or is it really?

While laws like this seem targeted at protecting local industries from foreign ownership, their blanket nature will create more problems for intra-African trade and business relations. Nigeria is one recent example that comes to mind.

Earlier in August, its National Broadcasting Corporation (National Broadcasting Corporation) sought to localise content in what seems like a move that protects local content producers from more powerful foreign competition.

In reality, it was going to hit DStv; a South African player, hardest.

[READ: Nigeria’s new broadcasting code ends content exclusivity and raises fine for hate speech]

When the heart is not at home

Last week, via Twitter, in response to an onslaught of draconian policies from the Nigerian government, entrepreneur and investor Iyin Aboyeji said:

“If only the Nigerian government knew how aggressively
Ghana is courting business in Nigeria to come over and set up, they would calm down and consult widely on their misguided revenue drive.”

Not to take away from his point, personal experience, and the difficulty of Nigeria’s business terrain, that statement isn’t the truest.

Four days after Aboyeji’s tweet, a JoyTV video showed a government taskforce shutting down shops in Accra, belonging to African traders for non-compliance. In the video, some of the traders allege it was a witch-hunt of sorts.

A reliable source confirms to me that this is not unlikely.

The aforementioned examples are not all the same, but point to a trend; generally, it is easier for an African to conduct business outside the continent than in member states. From regulatory stumbling blocks to choking tax regimes and even xenophobic sentiments, it is incredibly hard.
This is obviously a big problem, and it does not look to be easing up.

What does all this mean for one of the most progressive intra-African trade agreements to date?

The realities of AfCFTA
March 2018 – In Kigali Rwanda, African states signed what is tantamount to the world’s second-largest trade agreement, after the World Trade Organisation (WTO) in 1994.

Barring unnecessary jargons, this excerpt from an article by the Brookings Institution on the topic is a great summation:

“…[the AfCFTA] commits countries to remove tariffs on 90 percent of goods, progressively liberalize trade in services, and address a host of other
non-tariff barriers. If successfully implemented, the agreement will create a single African market of over a billion consumers with a total GDP of over $3 trillion. This will make Africa the largest free trade area in the world.”

Simply put, Africa came together to agree to make it easier for citizens of member states across the continent to do business with one another.

While the AfCFTA is largely targeted at physical goods, intangibles like startups and ICT services will be the biggest winners of this policy.

In theory, this is laudable and exciting, in practice, it looks bleak and unfeasible.

Across the continent, businesses with good optics get a break to operate in countries outside their primary scope. And this gives an impression of seamless operations, and this might be the case Aboyeji’s tweet is pointing out.

But until unknown African small businesses and startups do not have trouble expanding their operations across the continent, as dire as its necessity is, a single African market is at best clicks of hard work away, and at worst, a pipe dream.

Why Uganda’s $34 billion economy is ripe for tech disruption.
When thinking tech ecosystems across Africa, Uganda does not immediately jump to a mental list. But in the last edition of TechCabal’s TC Live event, Uganda’s country manager of mobility company, Eywa Miles explains why it is important to factor the East African country’s budding tech ecosystem into conversations. .

‘Twitter, do your thing!’ The aforementioned has become a modern day magic lamp summoning social media’s millions of users in their clusters and beyond to lend a hand towards causes that resonate with them in some way. In Federal ministry of GoFundMe Kay Ugwuede does a deep dive into the intricacies of crowdfunding, and platforms for Africa.

“The world pre-COVID left a lot to be desired. According to the World Bank, labor productivity remains the lowest in the world. The greatest resource the continent has is its great people and entrepreneurship. Our data shows that with everyone stuck, this pandemic made employers realize this. This forced them to rethink their people strategy, and managers and HR levelled up their game; better defining who is a good fit, making
hiring decisions based on data and assessments, rather than mere gut or ‘proximity’. And they invest more into learning and development. Happier employees perform better, craft productive organizations, and a better future. My hope (and strong prediction) is that African organizations start utilizing this ‘resource’ better.”

– Clemens Weitz, CEO, ROAM Africa.

Every week, we will ask our readers, stakeholders, and operators in Africa’s tech ecosystem what they think the new normal will look like, and will share their thoughts here. You can share yours with victor@bigcabal.com with ‘The Crystal Ball’ in the subject line.

Segun’s experience is one that is common among
young Africans including those in its tech industry. I personally know at least two people who were unable to showcase their tech startups to potential investors in South Africa because of unfair visa standards. For both of them it was going to be their biggest platform yet.

Moving around the continent is quite tough. Historically, it is easier for foreigners to get visas to African countries than Africans, although western nations don’t keep the same energy.

From June to August 2019, twenty-one-year old Orevaoghene
Ahia and her partner Kelechi Ogueji worked hard with their colleagues to build a pidgin-to-English machine translation model. After peer review, the project got published and accepted at the world’s largest gathering of artificial intelligence researchers and enthusiasts; the 2019 NeurIPS conference. Ahia and Ogueji couldn’t attend the conference in Vancouver due to dubious visa standards. Visa mobility is important for career progression and making important industry connections.

Things have changed on the continent since Segun’s experience in 2014. Africans now have liberal access to 51% of other African countries compared to 45% in 2016. Angola has multiplied its score by eight on the Africa Visa Openness Index since 2016, offering greater liberal access to more Africans. It has moved up 15 places over the past four years.

In reality, given xenophobic sentiments and unfavourable business policies, there’s still very little to celebrate. Add to these the fact that Africans still need visas to almost half of other African nations.

Will the AfCFTA and the AfDB’s continuous work not only achieve greater visa openness but proceed to make it much easier for Africans to do business with one another?

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