Africa

1. Abu Dhabi loan
2. Renewable v non-renewable
3. Taking the credit
4. Guarding against protectionism
5. Counting the cost
6. What they said

Also, meet Cape Town’s “Bicycle Mayor.”

Hello and welcome to Semafor Africa! We’re in New York, where we brought together many of the continent’s top business leaders, policymakers, and government ministers at our Next 3 Billion event on the sidelines of the UN General Assembly. The president of Malawi, heads of the World Trade Organization and African Development Bank, and senior executives from Google and Microsoft were just some of our many guests. Together, we discussed how people in low-income countries can harness the economic opportunities offered by digital technologies.

One of the recurring themes of the day concerned the steps required to build important infrastructure, from undersea fiber optic cables to data centers. But the perceived risks in African countries, from the perspective of international credit ratings agencies, create significantly higher borrowing costs to develop those crucial projects than in other parts of the world.

We’re focused on solutions, so many of our discussions touched on ways to develop fairer credit ratings that accurately reflect the continent’s economic fundamentals and drive sustainable growth. And, as part of that, we discussed the African Union’s plans to create its own rating agency.

🟡 We want to say a huge thank you to everyone who attended our event or watched online. In this edition, we’ve reported on some of the takeaways. And, if you’re curious, you can watch the event online.

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Kenya turns to Abu Dhabi

The size of a loan Kenya is seeking from Abu Dhabi to fund its budget deficit, according to reports. The loan is expected to attract an interest rate of about 8.2%, the reports said, which is lower than the interest charged on the East African nation’s sovereign bonds. The loan would be the latest in a series of bailouts the United Arab Emirates’ Abu Dhabi has extended to African countries in recent years as it seeks to build influence on the continent.

Africa adds 3X renewable vs fossil fuel

Installed capacity for electricity generation from all energy sources increased by 4% to 246 gigawatts in 2023, data from BloombergNEF shows. The largest share of capacity remains in North Africa with 42%. Two-thirds of Africa’s electricity supply still comes from gas and coal but there has been a slowdown in the pace at which new gas and coal plants are being built, the report notes. Indeed, the 7.9GW of renewable energy capacity added in Africa in 2023 was “more than triple the net additions of fossil fuels last year.” A tripling of investment in small-scale solar installations drove renewables investment in Africa to a record $15 billion in 2023, doubling the previous year’s levels.

Africa’s credit agency hopes

The African Union’s planned credit agency could unlock the necessary capital to develop the digital infrastructure needed to transform countries across Africa, two of the continent’s top bankers told Semafor Africa.

The AU planned to launch the agency this year but announced in July that it would not be fully operational until 2025.

African Development Bank President Akinwumi Adesina, speaking at The Next 3 Billion summit, said the cost of raising capital in Africa is “three to four times” higher than in other parts of the world. “This is based on risk, but mainly in terms of perceived risk,” he said. “Well, I’m sorry your perception is not my reality.”

Adesina said the AU’s agency would “actually provide a counterfactual to existing credit agencies so that Africa’s risk is properly addressed — whether it’s market risk, financial risk, political risk — is properly addressed.”

Standard Bank CEO Sim Tshabalala, agreed there was a risk perception premium but said the AU agency’s success would depend on transparency and the sophistication of the models used to determine ratings.

“If all that agency did was to replicate what current rating agencies do, it’s hard to see its competitive advantage,” he said.

— Alexis

Protectionism threatens Africa’s digital trade

African countries should work together to develop regulatory systems to boost digital trade across the continent, the head of the World Trade Organization told Semafor Africa.

Ngozi Okonjo-Iweala, who is seeking a second term as director-general of the WTO, identified infrastructure deficits and patchwork regulatory frameworks as the biggest obstacles to digital trade in Africa. But protectionist approaches to digital trade could lead to almost a 1% loss in GDP in the long term, with “bigger losses for developing countries,” she said during Semafor’s “The Next 3 Billion” event in New York, citing the WTO’s research.

“Protectionism leads to fragmentation of trade” and avoiding it would make it easier for businesses to operate in Africa, said Okonjo-Iweala.

The value of digitally-delivered trade is about $4.25 trillion but Africa has only 0.9% of it, she estimated. Growing the continent’s share requires concerted efforts to establish the right regulatory systems in multiple countries.

Increasing Africa’s capacity for digital trade would require greater investment in electricity and telecommunications infrastructure, Okonjo-Iweala said. About 600 million Africans, or 40% of the continent’s population, lack electricity, the World Bank estimates.

— Alexander Onukwue

We need $3.4 trillion

Africa will need $3.4 trillion in funding for infrastructure projects in order to support the continent’s digital transformation, according to the CEO of Africa’s largest bank by assets.

Sim Tshabalala of Standard Bank, speaking at Semafor’s “The Next 3 Billion” event in New York on Tuesday, said “there’s no question” Africa has an infrastructure deficit that has to be dealt with before a digital transformation can take place.

“It’s going to cost us a lot,” said Tshabalala. “Our corporate and investment bankers calculate that we will need roughly $3.4 trillion in the next while to put in place the energy, the logistics, the roads, the bridges, the fiber, the towers, and so forth.”

The figure is based on Standard Bank’s internal research.

Highlighting the significant solar and wind energy potential of African countries, Tshabalala said investments in renewable energy would also help accelerate the continent’s digital transformation. This, he said, could include the use of renewable energy to mine cryptocurrencies.

Countries including Kenya and Ethiopia have been increasingly offering crypto mining firms access to their renewable energy resources including hydroelectric and geothermal power.

— Martin K.N Siele

What they said:

Geopolitics

🇺🇸 🇦🇴 U.S. President Joe Biden will travel to Angola on Oct. 13-15 to meet President Joao Lourenco and discuss increased collaboration on shared priorities, the White House said on Tuesday.

🇮🇳 India is in talks with countries in Africa including Rwanda and Namibia to help them build digital payments system using its homegrown Unified Payments Interface, sources told Reuters.

🇪🇬 🇸🇴 Egypt said it had delivered a second major cache of weapons to Somalia, including anti-aircraft guns and artillery. Ethiopia’s foreign minister said he was concerned arms from “external forces” would threaten regional security.

Tech

🇪🇹 Ethiopia’s Ethio Telecom is in talks with China-owned company Shandong Hi-Speed Group about building a data center in the country.

🌍 Electric vehicle startup Zeno raised $9.5 million to build out motorbikes and swappable batteries that will arrive in East Africa and India in 2025.

🇳🇬 Nigerian payments company Flutterwave launched its Send App, enabling money transfers to Africa, in 49 US states. It follows a partnership with Virginia-based MainStreet Bank.

Governance

🇸🇳 Senegal’s former ruling parties of ex-presidents Macky Sall and Abdoulaye Wade — Alliance for the Republic party and Senegalese Democratic Party — formed an alliance ahead of legislative elections on Nov. 17.

🇨🇩 Authorities in DR Congo’s South Kivu province approved the resumption of all mining activities in the region, which is rich in minerals such as gold, copper, diamond, tin, tantalum and cobalt. Mining was suspended in July.

🇿🇲 Zambia’s President Hakainde Hichilema suspended three constitutional court judges over alleged judicial misconduct.

🇸🇸 Lawyers in South Sudan on Monday filed a case in its top court challenging President Salva Kiir’s decision to postpone elections and extend the transitional government’s tenure for 24 months to Dec. 2026.

Health

🌍 The US announced at least $500 million and 1 million vaccine doses in support of Africa’s mpox response.

Monetary Policy

🇳🇬 Nigeria’s central bank on Tuesday raised its benchmark lending rate by 50 basis points to 27.25%. The rate hike — the fifth this year — is part of an effort to tame inflation.

Deals

🇲🇼 National Bank of Malawi, the country’s largest lender by assets, will receive a $100 million fund from Afreximbank to enable trade finance.

🌍 Africa-focused private equity firm Helios led a $100 million funding round for M2P Fintech, an Indian software provider for banks and financial institutions that intends to expand to Africa.

Sindile Mavundla, known as Cape Town’s “Bicycle Mayor” is on a mission to see more girls from the townships take up the sport and explore its opportunities. He teaches first-time riders how to ride a bike, including young girls in impoverished communities. Through his Khaltsha Cycling Academy, founded in 2022, Mavundla says he is keen to impact lives positively and help his members explore the potential of cycling in changing lives. He told Reuters that a majority of girls in Cape Town’s Khayelitsha township lack sport options, and that was on course to change with the opportunity to learn how to cycle.

• Wall Street jockeys for jobs as election nears.
• The shifting foundations of Gulf-US ties.
• Data center boom is giving clean energy a jolt.

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— Yinka, Alexis, Alexander Onukwue, Martin Siele, and Muchira Gachenge