International trade has been a great stabilizer for many countries, contributing to economic expansion even at times of slackening domestic demand.....
Overview of Australia’s existing trade and investment relationships with the countries of Africa
The continent of Africa, second only to Asia in both landmass and population, is diverse geographically, culturally, linguistically, and economically. Comprising 54 sovereign states, nine territories, and two de-facto independent states, Africa is home to over 1.2 billion people.
This number is increasing sharply, however, with African nations boasting some of the youngest and most rapidly growing populations in the world.
Submissions emphasized the importance of recognizing that Africa cannot be described or analyzed as a single market but is comprised of discrete economies with separate opportunities.
The Department of Foreign Affairs and Trade (DFAT) provided information on trade between Australia and individual African economies.
This data indicates that the goods trade with South Africa is, by a wide margin, Australia’s most valuable trade relationship with an African country. In 2016, Australia’s trade with South Africa was valued at over $2 billion.
Australia also maintains trade relationships with several other African countries that, in 2016, were valued at over $100 million. These include Algeria, Egypt, Gabon, Ghana, Mauritius, Mozambique, Nigeria, and Republic of the Congo.
Australia’s major merchandise exports to Africa, in 2016, were largely concentrated in the primary industries, with aluminum ores, wheat, coal, vegetables, meat and wool all featuring in the top 10 exports. Civil engineering equipment and parts, and specialized machinery, together formed 12 per cent of merchandise exports to Africa.
The top five export destinations for Australian goods to Africa are:
1. South Africa: aluminum ores; coal; machinery and parts.
2. Egypt: vegetables; wheat; wool.
3. Mozambique: aluminum ores; wheat.
4. Nigeria: wheat; edible products.
5. Ghana: civil engineering equipment and parts; machinery and parts.
Australia’s major merchandise imports from Africa, in 2016, were concentrated in crude petrol and passenger motor vehicles which accounted for 84 per cent of imports.
DFAT recommended that businesses draw on the experience of a local partner or consultant in order to navigate these challenges.
Governance and regulation
In its submission, DFAT noted that ‘uncertainty around regulatory regimes can have a chilling effect on potential Australian investment across all sectors’ and issues such as opaque and unfamiliar tendering practices can also deter Australian companies from bidding for government contracts and advantage competitors.
Opportunities to expand trade and investment
Overview of opportunities
According to a recent paper from Future Directions International , most of the world’s population growth in the 21st century will occur in Africa. By 2050, it is estimated that the population of Africa will have more than doubled from its current 1.2 billion people to nearly 2.5 billion.
This population growth is expected to be coupled with rapid urbanization. The Future Directions paper anticipates that, by 2100, five of the world’s 10 largest cities will be on the African continent.
Africa also lays claim to the world’s youngest population, with more than 50 per cent of the population of Africa younger than 20 years old. Due to increased life expectancy and reduced infant mortality rates it is expected that Africa will have access to a young and plentiful workforce.
Regarding trade and integration, a Continental Free Trade Area is being established under the auspices of the African Union.
There are specific areas where Australia is well placed with relevant expertise beyond mining capabilities. For example Windlab and Carnegie Clean Energy drew attention to the export potential of Australia renewable energy technology to meet a significant energy shortage in large areas of Africa. Carnegie Clean Energy drew particular attention to the potential for leveraging Australia’s mining capability to include power and water solutions.
Grame Barty and Associates also highlighted opportunities for Australian business:
…particularly in the areas of infrastructure, resources and energy, food and agribusiness, international health, advanced manufacturing, technology and services.
However, in its submission, DFAT noted that recent DFAT and Austrade analysis indicates:
…the most realistic and immediate commercial opportunities for Australian companies in Africa are in mining and related equipment, technology and services; education; agribusiness and food and infrastructure.
The Export Council of Australia stated that ‘Africa is a natural destination for all the products and services related to mining and agriculture in particular’. Other areas of expertise include: infrastructure and construction and related services, financial and professional services, tourism, education, and advanced manufacturing. The top ten growth sectors in Africa are: resources, wholesale and retail, agriculture, transport and communications, manufacturing, financial services, public administration, construction, real estate and business services, and tourism.
Broadening commercial interests
As noted above, with Australian companies well established in the extractive industries, submissions highlighted the need for Australia to broaden commercial interests beyond the mining industry.
This was recognized by the Minister for Foreign Affairs, the Hon. Julie Bishop MP in her speech at the Africa Down Under Conference in Perth on 8 September 2017.
The Minister emphasized the broadening of Australia’s commercial interests from the already strong base in extractive and mining services, infrastructure and energy into retail and professional services.
The Minister stated that ‘the opportunity for mutual growth in our economic partnerships in these and other sectors is enormous’.
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