World | Africa

April 17, 2013

Simon Freemantle: "Mauritius Certainly Can Be the 'Gateway' to the East Africa"

South Africa is positioned as a 'gateway' for Southern Africa, providing good access in terms of logistics. Mauritius, meanwhile, can certainly become a 'gateway' for East Africa, including financial services. This will be a pretty serious competition for South Africa.

This is explained in the Defi Media, Simon Freemantle, Senior Analyst, African Economy Policy Unit, Standard Bank, based in Johannesburg, South Africa, met at the 5th Summit of the BRICS (Brazil, Russia, India, China, South Africa) in Durban.

The multinationals, he said, with a pan-African strategy, can not afford to have one operation in Africa is too big and too important differences basis. "To be viable in Africa, it takes at least two or three regional hub," he says.

The advantages of Mauritius for this purpose are, of course, a legal framework for the movement of capital and a more flexible tax system. The small special economic zone (SEZ) Chinese Mauritius, although it is not yet developed, also has potential in terms of the proximity of Mauritius with East Africa. "Maybe it could serve as an example in that it is the cooperation with China," he says.

Regional treaties: Determinants to compete with Asia

Simon Freemantle said that regional and other regional and bilateral treaties, like the SADC, COMESA, area Tripartite Free Trade Area (TFTA) and DTA and IPPA communities will be crucial to increase regional trade.

Regional trade, due to the low level of industrialization of African countries remains low (around 12%). Because, he says, there is in fact no demand for commodities and not really manufacturing hub in Africa to fuel this consumer revolution is happening in Africa.

To compete with manufactured goods from Asia (China, Indonesia, Bangladesh and Vietnam, among others), regional treaties can play a key role in making Asian exports less competitive on the African market.

"At least for a certain period, to allow the African manufacturing sector to have some momentum. While this may encounter barriers with the WTO, we know that there is a certain level of protectionism allowed in many countries, "says Simon Freemantle.

Through the good diplomatic relations in the BRICS grouping, China can address the structural problems of the African manufacturing sector, even if it is not in their immediate interest.

"China can, for example, invest more in SEZs and contribute to activities with higher value added. The latter will act as hubs for China manufacturers can ensure transfer of technology and know-how, "he says.

Also, according to Simon Freemantle, the model of large ICT firms such as Huawei with large 'outreach' training programs, as is the case in South Africa, can contribute to this change.

"But it will take time before that Africa has the manufacturing capacity to compete with Asian countries. The main issue is, of course, the development of regional infrastructure in Africa, "he warns.

Manufacturing: Mauritius must create more economies of scale

Manufacturing needs of economies of scale, especially in terms of human resources with expertise base with competitive salaries. And this is precisely what is lacking in Mauritius. So what perspective to Mauritius to supply the African market?

Simon Freemantle says Mauritius must create more economies of scale in that it is its manufacturing capacity. "It should not pose major problems. Mauritius must learn to be pragmatic regarding investment in certain sectors with a decent immigration policy. Mauritius certainly a lot of potential, since many African countries in its ability to create an enabling environment for investment, "he says.

Another way to Mauritius, according to Simon Freemantle, would create brands that will extend into the rest of the region while enjoying some agreements may have been concluded and the human capital of the region.

The 'joint ventures' (JV) are perhaps the most commonly used models because of risk sharing with a local partner, as well as relations with the government and the local population. But this is not essential. Many South African companies operate successfully in Africa outside of this model. "If you have the perfect partner, it would be foolish not to seize the opportunity. But it is possible to go it alone, "he maintains.

The agro-business: the main engine of growth in Africa in the long-term

Simon Freemantle says agribusiness, in its broadest sense, will in the long run (in the second half of this century) the main engine of growth in Africa, even more important than the oil and mining sector.

Indeed, many companies involved in the food, like KFC or supermarket chains, starved of adequate support to required standards.

"The demand is massive and growing very fast. The potential is enormous in terms of outlets sophisticated, fresh, storage of agricultural products, mechanization of agricultural production and fertilizers, among others. The BRICS are already involved in this field, with India and China to a certain level, "he says.

 

 

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