Norwegian-African Business: What to Expect in 2019

Published on 5th February 2019

Africa is an increasingly important trading partner for Norway. Last year, Norwegian companies exported goods worth over 19 billion kroner to Africa. That’s an impressive 50 % increase from 2017. Services exports account for an additional 6 to 7 billion. In US dollars, exports total 3 billion. Norwegian investments in Africa amounted to 13 billion US dollar at the end of 2017. The return on direct investments to Norwegian shareholders was 2 billion US dollar in the same year.

In 2019, economic growth on the African continent is expected to continue, at a rate of between 4 and 5 %. This is well above the expectations for our home market and for the global average. There are plenty of opportunities for Norwegian businesses to take part in this growth.

Sub-Saharan Africa will continue to be home to several of the world’s fastest growing economies, including Ethiopia, Rwanda and Ghana.

In fact, if we factor out some of the largest economies – Nigeria, Angola and South Africa – the rest of the continent is forecasted to grow by close to 6 %. However, the volatility of commodity prices will continue to have an impact, in particular on oil-producing economies and economies that have not yet diversified.

At the political level, presidential elections are coming up in Nigeria and South Africa. Given the important regional roles of these countries, the outcomes will affect the whole continent.

There are also challenges. Debt levels are rising considerably. We are coming to the end of a decade of inexpensive lending. The number of African countries at high risk of debt distress is increasing rapidly. Updating debt management strategies and strengthening governance and national resource mobilisation ought to be a priority for African policymakers.

Africa has the lowest share of intra-continental trade. Reaping the benefits of trade is essential for achieving inclusive economic growth. African states took a big step forward when 49 members of the African Union signed the African Continental Free Trade Agreement last year. So far, 18 parliaments have ratified the agreement, including Ghana, Kenya and South Africa. This means only four more ratifications are necessary before the African Continental Free Trade Area can be operational, which is expected already later this year.

Lower tariffs, transparency and harmonisation of rules and procedures, and the reduction of non-tariff barriers will boost trade and diversification, in particular between African countries. Cross-country value chains will become more efficient, providing new opportunities for all businesses operating in Africa.

It should be noted that Nigeria is one of the six states that has not signed the agreement. However, Nigeria’s steering committee is expected to present its recommendations to President Buhari shortly.

At the same time, African countries need to show sustained and solid commitment to the agreement if it is to realise its full potential. If it is successful, this will be the largest free trade deal since the World Trade Organization was established.

I would also like to say a few words about the World Trade Organization, an organisation that is under pressure these days. Despite current challenges, it continues to provide a unique platform for global trade. A predictable and rules-based trading environment is of fundamental importance for Norway and Norwegian businesses, and for developing countries too. The question is really a simple one: Do we prefer the power of law or the power of might?

Norwegian businesses have been clear in expressing their concern that the current looming uncertainty is bad for business, and that the rules-based system is worth preserving and protecting. I expect businesses wherever they invest, will speak up to all governments, at home or abroad on other continents, for a rules-based system that creates a level playing field.

Africa’s working-age population is projected to increase rapidly, and the pressure to provide decent jobs will intensify. Africa will need 12 million new jobs every year to prevent a rise in unemployment.

We cannot achieve this unless the private sector is on-board. Norway continues to support the G 20 Compact with Africa initiative, which encourages African governments to improve their regulatory frameworks in order to attract more investment. A lot of progress is already being made, for instance in Ethiopia, but more needs to be done. Norway has undertaken to promote Africa as an investment destination in connection with this work. Countries that improve their regulatory framework should reap the benefits of increased local and foreign investments. NABA is a key partner for us in this work.

Through our contributions to the multilateral banks, we also provide technical assistance and finance on ‘soft terms’ to stimulate investment. The banks are increasingly providing guarantees and developing new financial instruments to attract financing from the private sector. There is particular focus on enabling women to participate more equally in the economy by improving their access to finance and technology.

We believe that there are good opportunities for the Norwegian private sector to play a stronger role in the World Bank’s and the African Development Bank’s investment portfolios in African countries. This could support development ambitions, while at the same time benefiting the companies concerned.

It seems that Norwegian companies are not fully aware of the opportunities that multilateral institutions offer. Only 260 Norwegian companies are registered in the UN Global Marketplace. In 2017, the UN procured goods and services worth 18.6 billion US dollars, for example for infrastructure projects in ICT and renewable energy. Less than 0.3 % of these contracts involve Norwegian businesses.

We are also stepping up our efforts at the bilateral level. The government is delivering on its commitment to increase the annual capital allocation to Norfund. This puts Norfund in a position to invest in sectors with high developmental impact, in least developed countries and in countries with vulnerabilities. Norfund has consecutively succeeded in producing surpluses on its portfolio and has grown to become our most important instrument for promoting private sector development in developing countries. Norfund’s mandate is to invest in settings where other commercial investors are more reluctant to invest due to high risks, whether these are real or perceived risks. Over the years, Norfund has nurtured local knowledge of the markets, especially through five strategically placed local offices. This makes Norfund well positioned to understand the risks involved in investing in developing markets. The most recent of Norfund’s five regional offices opened with the presence of the Minister of International Development in Accra, Ghana, in March last year.

Mobilising private capital, local or foreign, for investments in developing countries is critical to succeed in financing the Sustainable Development Goals. Hence, a couple of years ago, we launched a model for strategic partnerships with the private sector. This has proven successful, but we would like to see bigger partnerships with even more impact on economic development and job creation on the ground.

Last year I mentioned Yara’s mining project in Ethiopia, and how we were focusing on vocational training. This year, we are being even more ambitious in Ghana. Aker Energy has acquired offshore licences, and struck oil on the first drill just a few weeks ago. Our aim is to work closely and strategically with Aker Energy to boost local job creation. Norwegian technology and expertise have an important role to play in our joint ventures with Ghanaian partners.

When a company makes a major investment, we try to make the best use of our development tool box to achieve the maximum development impact. We believe this can be a key to spurring economic growth and creating jobs.

Looking ahead, there are three sectors that particularly stand out. Having spent many years in one of them myself, there is one sector that is particularly close to my heart. The oceans – fisheries, aquaculture, shipping and offshore energy production – are the backbone of our economy. In Africa too, some of the greatest opportunities are blue.

It should be a matter of serious concern for all of us that the state of the oceans is deteriorating. More than 15 tonnes of plastic are released every minute into the very oceans that are so crucial for feeding a growing world population. Marine litter and micro-plastics are truly global problems.

Norway and Africa have everything to gain from productive, sustainable and healthy oceans. In order to achieve this, we need governments, industry, consumers, civil society and academia to join forces. The Norwegian Prime Minister has taken the initiative to establish the High-level Panel for a Sustainable Ocean Economy, which consists of over a dozen heads of state and government, including the presidents of Ghana and Namibia.

Several important ocean-related activities are lined up in 2019. In May, the Norwegian embassy in Maputo is co-hosting a conference entitled ‘Growing Blue’ with the Government of Mozambique. Over 500 participants are expected. At Nor-Shipping in June, Africa will be given particular attention. A specific Africa programme is being prepared in cooperation with the African Union and other partners. High-level representation is expected from African governments and ocean industries. And in October, Norway will host the international Our Ocean Conference. Many African countries will be invited.

It is clear that attending conferences will not in itself solve our global problems. People do, and actions do. Using these platforms to find new partners who we can work with to develop new and innovative solutions will create new opportunities for collective action.

There are huge opportunities in the African energy sector. Half of Norfund’s portfolio is invested in renewable energy. Scatec Solar, a strategic partner to Norfund and the largest solar power investor in Africa, has solar power plants in Rwanda and South Africa, and is setting up plants in Mali, Nigeria and Mozambique. SN Power has acquired a majority share in the 250-megawatt hydropower plant Bujangali in Uganda, an investment worth nearly 3 billion NOK.

In Tanzania, Equinor is set to enter into negotiations with the Tanzanian Government on the development of a major offshore LNG project. New projects are also expected to be launched in Mozambique this year.

Norway has entered into a partnership with the African Development Bank, in support of the New Deal for Energy in Africa strategy. Through Norad, we are providing funding to the Sustainable Energy for Africa (SEFA) fund. Again, this is a sector where we hope to build stronger ties between Norwegian companies and the bank.

The third sector is digitalisation. The extensive mobile phone use in Africa provides numerous opportunities. Mobile payments were common in Africa long before ‘Vipps’ was launched in Norway.

Still, the digital divide between large parts of the African continent and the industrialised world, and between urban and rural areas, is increasing. Internet connectivity remains very low. Poor infrastructure and ICT skills are still obstacles to economic and social development.

Digital technologies have the potential to accelerate development significantly. Digitalisation is therefore a priority in Norway’s development policy. We launched a digitalisation strategy in August, and are currently developing a white paper on digitalisation in the context of development cooperation. We will invite the private sector, tech environments, academia, civil society and other partners to take part in the preparation of the white paper.

Supporting local innovation and entrepreneurship ecosystems is a central element of these efforts. We need to connect Norwegian start-ups and accelerators with African partners, so that they can share ideas and implement projects together.

The Norwegian ICT industry is expanding its network of strategic partnerships to Kenya with a view to setting up coding camps for young people across the country. This private-sector-led initiative helps young people to become digital creators rather than just digital consumers.

Norway’s future welfare depends on our industries remaining competitive and innovative. Our ambition is to further strengthen Norway’s position – both as a trading nation and as a leading research and innovation hub – in fields where we have specialist expertise.

The Norwegian Export Credit Guarantee Agency (Giek) and Export Credit Norway are two key instruments for reducing risk for Norwegian investors and exporters.

The oceans, energy and digitalisation are also top priorities for most of the 13 Norwegian embassies on the African continent. Their mission is to promote Norwegian interests in the country or countries for which they are responsible. Promoting the interests of the Norwegian business sector is an integral part of this work. Through their experience on the ground and daily interaction with the national authorities, civil society organisations and other members of the diplomatic community, our staff abroad are a valuable source of knowledge about the situation in the country concerned. Not only about the political situation, but also about the country’s culture, history, and society as a whole.

For companies looking at new markets, it can take years to build this knowledge. Our embassies take a service-minded approach to their interaction with the business community, sharing their knowledge and views, and listening to your concerns.

That being said, our embassies cannot do your work for you. They do not have in-depth knowledge about every single sector or market. But with their extensive network of contacts, they will often be able to guide you in the right direction, and maybe open some doors. I encourage you to continue to make use our embassies, but at the same time to be realistic in your expectations.

Last, but not least, let me emphasise that the Norwegian Government has clear expectations of Norwegian businesses, not only in Norway but also when they operate abroad.

Companies that operate abroad benefit from the positive image Norway enjoys in the international arena. But this benefit also entails responsibilities. Norwegian companies are often seen as ‘ambassadors’ of Norway, and your actions may have consequences well beyond the reputation of your company.

We have a common interest in preserving Norway’s reputation as a responsible and trustworthy partner. Trust takes years to build, seconds to break, and forever to repair.

We expect Norwegian companies to be familiar with and follow the OECD Guidelines and the UN Guiding Principles for Business and Human Rights. A few weeks ago, the OECD Due Diligence Guidance for Responsible Business Conduct was released in Norwegian.

There are countless opportunities in Africa. While risks remain high in some markets, so too are the potential rewards. Both through our foreign policy and through our development policy, the Norwegian Government is encouraging countries across the globe to develop regulatory frameworks that are conducive to private sector development. We are convinced that the private sector has a major role to play in the efforts to reach the UN Sustainable Development Goals, and that strategic partnerships can catalyse much-needed private investment.

By Marianne Hagen

State Secretary at the Ministry of Foreign Affairs, Norway.

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