As of February 2021, 36 African countries had ratified the agreement establishing the African Continental Free Trade Area (AfCFTA), which aims at supporting intra-African trade, as well as strengthening the continent’s position in global trade negotiations.
In this interview, Dr Amy Jadesimi, CEO of LADOL Free Zone (LADOL), shared her views on the AfCTA and her insights into how to sustainably industrialize the continent.
Today, what is the most fundamental challenge holding back logistics development and business expansion in African countries?
Dr Amy Jadesimi: In a nutshell, “Made in Africa” needs to become a ubiquitous reality. Creating infrastructure and facilities, and training our young people are all vital to creating this reality. African industrialization will also drive investment into the connections that we need to make between African countries, for free movement of materials and people, enabling cohesion and greater market growth. AfCFTA can be the foundation triggering this development to maximize profitability and reliance. African industrialization must be done sustainably in terms of the processes used, solutions created, and the market opportunities addressed.
It is all about making the continent more self-sufficient. We are transitioning to a market where we, as Africans, are creating our own finished goods, working together to manufacture those goods, and then buying them from each other. It is a paradigm shift that will benefit all countries in Africa and drive global peace and prosperity.
Why is sustainable industrialization crucial for Africa, and how will the AfCFTA help African countries to achieve it?
Dr Amy Jadesimi: Across the continent of Africa, countries have different strengths and weaknesses. But what we all have in common is our huge untapped growth potential. African countries will continue to grow over the next century and, one way or another, we will all industrialize. The research shows unequivocally that the best business models for us to adopt are sustainable ones. Sustainability in business isn’t a moral choice, it is the smartest economic choice. United Nations’ Sustainable Development Goals have provided us with a template that the last decade of analysis has shown creates the most resilient, profitable and competitive new businesses. As a commissioner on the Business and Sustainable Development Commission, I participated in the creation of a report that demonstrated USD 12 trillion new market opportunities for sustainable businesses, in just four verticals of energy, urbanization, agriculture and healthcare.
African countries have the advantage of being able to build sustainably without being hampered with backward integration challenges. For example, in LADOL Free Zone, we are building a circular economy in our Special Economic Zone. Building a circular economy from inception is allowing us to achieve net-zero by 2035. Across the continent, the public and private organizations can leverage the AfCFTA to create solutions never before seen in the world, building an inclusive and high growth market.
What is key to fostering African business development, including logistics growth?
Dr Amy Jadesimi: To create the right environment, we need significant long-term investments. Unfortunately, the definitions of bankability imposed on African entrepreneurs are not fit for purpose. Historically, to find funding as an indigenous entrepreneur, you had to provide 200% security and have all your clients signed up ahead of funding. These requirements are not realistic.
However, some financial institutions have recognized the problem and expanded their criteria of bankability. To evaluate bankability, we need to consider criteria that not only ensure sufficient insurance to investors but also support a market case. That is where sustainable business models will help persuade investors and get money in the right places to industrialize Africa and therefore contribute to global prosperity.
In logistics, we have found that the strong financial incentives that come with sustainable operations work very well to get stakeholders on board. For example, companies operating out of LADOL halve their costs of logistics service delivery in the region. Once they’re onboarded, we then start to engage them in our sustainability pledge.
Mainly, we need the patience to create this market, because sustainability is not a point in time, it is a journey.
Disclaimer: this article was written by an external expert contributor to CEVA Insights. The perspectives and ideas are the contributor's and do not necessarily reflect the views of CEVA Logistics.