- Although Nordic investors have historically approached Africa cautiously, there are signs that this trend is shifting.
- For example, bilateral trade between Norway and Africa has grown from $3.1 billion in 2018 to $5.2 billion in 2022, marking a 68 per cent increase.
- Africa seeks strategic partnerships to foster the continent’s economic growth, enhance its political identity, and bolster its global standing.
Investors from Ireland and Nordic countries are encouraged to consider Africa a promising destination for their investments, as the continent holds significant growth potential.
This call comes after an official visit by Prof. Kevin Chika Urama, the Chief Economist of the African Development Bank Group, to Denmark, Finland, Ireland, Norway, and Sweden.
The African promise
Prof. Urama noted that Africa’s projected population boom, which could make it the world’s most populous region by the end of the century with up to 3.4 billion people, presents substantial business and investment opportunities for the rest of the world.
“With a population of more than 1.3 billion [currently], a youthful population of 600 million, rapid urbanization and rising incomes of the middle class, Africa is the leading emerging market frontier,” said Prof. Urama.
Ms. Mette Knudsen, the Executive Director for the Nordic-Indian-Irish Constituency at the AfDB, joined him on the trip.
Prof Urama explained that Africa’s agriculture and energy sectors present the most significant trade and investment opportunities for Nordic countries. Africa’s food and agriculture market is projected to increase from $300 billion in 2022 to $1 trillion by 2030. This sector presents a growth potential of 233 per cent.
Africa’s current ties with Nordic countries
Increasingly, Africa seeks strategic partnerships to foster its economic potential and enhance its political identity. The continent is also fortifying its role on the global stage.
Historically, Nordic investors have exhibited risk aversion toward Africa. Nevertheless, there are signs that this trend is evolving. For instance, bilateral trade between Norway and Africa surged from $3.1 billion in 2018 to $5.2 billion in 2022. This reflects a 68 per cent increase.
However, Foreign Direct Investment (FDI) by Norway in Africa stood at $1.6 billion in 2021. This represented a 12 per cent decline from the FDIs reported in 2020. “Much needs to be done to improve trade and investment between Norway and Africa. Between 2018 and 2022, total exports to Africa from Norway represented only 0.4 per cent of Africa’s total imports,” Prof. Urama noted.
He said bilateral trade between Denmark and Africa increased by 28.6 per cent between 2018 and 2022. It surged from $2 billion to $2.6 billion and has enormous potential for further expansion.
“But this increase is insufficient in both value and relative terms. Between 2018 and 2022, total exports to Africa from Denmark represented on average only 0.3 per cent of Africa’s total global imports,” he said.
Denmark’s imports represent only 0.1 per cent of Africa’s total exports between 2018 and 2022. “This needs to change given the huge potential and opportunities that African markets offer to Danish businesses for trade and investment and the strong partnership between Denmark and African countries,” he said.
Promising sectors for collaboration
During his visit, Prof. Urama called investors to seize investment opportunities in Africa. In particular, he singled out key areas such as green metals, such as lithium and cobalt, that will drive clean technologies globally.
“The continent holds 80 per cent of the world’s platinum; 50 per cent of cobalt and 40 per cent of magnesium, as well as vast deposits of lithium and graphite,” he said.
There are also untapped opportunities in the development of Special Agro-industrial Processing Zones. Africa possesses 65 per cent of the world’s uncultivated arable land. This offers significant potential for sustainable agriculture and agribusiness.
Prof. Urama noted that Ireland and the Nordic countries should leverage the Africa Continental Free Trade Area (AfCFTA), too. AfCTA is the world’s largest regional bloc regarding the number of countries, estimated at a market size of $3.5 trillion.
Given the significance of oceans to Nordic economies, the blue economy has emerged as an under-explored area. This is a segment where Norwegian and Nordic companies can contribute immensely to the African markets.
Opportunities in the blue economy
With their experience and expertise, Nordic companies have an edge in steering the growth of the blue economy in Africa. Additionally, Norway, which runs on 97 per cent hydropower, is in a great position to offer insightful knowledge on clean energy.
The AfDB estimates that Africa needs $60 to $90 billion annually to bridge the energy infrastructure gap. The energy supply gap has left over 600 million Africans without access to electricity.
Nordic countries are renowned for establishing some of the most egalitarian societies globally. African nations can draw valuable lessons on fostering equality. These European countries can also partake in the success of startups by addressing Africa’s critical human capital requirements.