 Good morning everybody and welcome to the World Economic Forum here in Cape Town. My name is Chris Bishop. I'm the editor of CNBC Africa I've been reporting from this continent for more than quarter of a century and today we're looking at the story of African growth We're looking at the story of the continental free trade area also be looking at the fourth industrial Revolution as we pick up on our theme that we carried two years ago in Durban, which is Africa's Economic update now just to start off with let me introduce my esteem panel to my left is Lesecha, Kenyahu the South African Reserve Bank governor next to him is Shola David Borja the CEO of standard Bank in Nigeria and the far end is Albert Zufak the Chief Economist for Africa for the World Bank and if I just ask my panel here just a short statement at the start Where you think this continent is going economically starting with Mr. Kenyahu? Well, the the thing is about the outlook I think that what we have seen For this year and for next year the outlook is that this continent will continue to grow faster than the world average That's a that is the good news But at the same time there are still there are still risks and the risks have been associated with deteriorating public finances and And rising debt levels some of the countries that had received debt relief seem to have spied up debt once again and The difference this time though is that the debt is not official debt. It is debt that is held in It's private held by the private sector and that that poses a challenge But for as long as you have got improving growth prospects and for as long as you are able to Contain deficits then the situation can the debt situation can be contained Shola, how do you say from a banking perspective? Well, we are positive. I mean I moved out of my Nigerian role two years ago and I've been covering Africa West East Central and Southern Africa and The one thing that we have seen despite all the headwinds is that there is still growth on the continent and the convergence of technology innovation and various sectors a Greek energy is enabling us to find Financing solutions to address client problems and that is helping to drive growth on the continent Mr. Suvak, how do you say it? Thank you, Chris Well from our perspective in would a Recovery on the continent will remain fragile We still see Recovery in Non-commodities non-commodity exporters on the continent We still have in the year ahead Five of the fastest the 10 fastest growing economies being on the continent and and these include Ghana for sure This include Ethiopia, Senegal, Côte d'Ivoire among others Rwanda those economies continue to power head, but the you know risk to our macro outlook are mostly on the downside and Those risk include at least three important factors one is the growing trade tensions across the world that are threatening to lower global growth The the second is volatility in commodity prices that will continue to undermine growth in our largest economies and the third important You know risk I see Is certainly dead as the governor has mentioned but more importantly? I think a fourth one I would add is the challenge of inclusion and When I mean inclusion I see jobs. I see opportunities and I see sound fiscal policies And let's just check in on the growth story Sub-Saharan Africa we're talking about three and a half percent roughly at the moment two point upon two point three percent 2018 Expected to grow four percent in 2020, but for most economists on this continent That's that's not enough. How do we get the elusive growth that every country seems to be searching for well? We will get it, but just An update on the figures to say that by the way if you remove South Africa and Nigeria from the figures Sub-Saharan Africa is growing by an excess of five percent And so what is dragging the average in Sub-Saharan Africa are the two largest? Economies on the continent. So the rest of the continent is actually is actually growing growing very strongly. I How do we get the elusive growth? I have got three three propositions And they are no there are no brainers that the first is that The continent has got to take advantage of the opportunities offered by globalization And that means that Africa should actually be trading more with with the rest of the world and of course It raises the issues of what the threat tensions would actually mean for global demand And we've got to we've got to engage with that the second is that this Africa free trade agreement it's a big issue for us because African countries have not quite been trading with each other part of it had to do with what I would call behind the border barriers to trade and that talks to the issues of Moving the goods across the continent trading is one thing, but how is our logistics frame? How's our logistical system within the continent to to move the goods? Across the continent varying from everything from different rail gauges to how long it takes to move from one part of the African continent To the other those are issues So there are infrastructure bottlenecks But that in itself offers an opportunity because dealing with those infrastructure bottlenecks and rolling out infrastructure Couldn't even self be a source for growth So taking advantage of the opportunities offered by globalization Trading more with each other dealing with the infrastructure bottlenecks that a hinder a threat amongst African nations Sure if we get straight to this issue I mean this continental free trade Eras been described very recently by the finance minister here in South Africa Teton Buena is like one of the biggest things That's ever going to affect this continent in the in the century to come. So How much do you think it could change the game? I? Think it's a game changer. We're talking about, you know 1.2 billion people on the continent it combined GDP of 3.4 trillion dollars and the reality is that trade has been occurring informally on The continent what the continental free trade agreement does is first of all it helps to formalize a lot of What is going on that is not recorded? It also helps to? provide standards by which all the countries can be measured on and Moving the percentage of intra Africa trade No matter how small it's going to be huge progress like mr. Governor said Obviously, we've there lots of challenges ahead Infrastructure is one of them, but the exciting thing is if you think about the Availability today of digital infrastructure. We've got AWS and Microsoft that I invest in in the cloud on the continent The ability to deploy Innovative digital solutions, you know, I think will enable intra Africa trade Afroexem is talking about putting in place a payments platform to enable trade so a combination of Infrastructure having the right payment platforms being able to ride on the digital infrastructure that is being Putting place telecoms infrastructure, you know is fairly well advanced in Africa I think would help to enable growth and obviously the financiers are Here standard bank is certainly well positioned to drive trade on the continent. Oh, but At the moment Europe into Africa you're into European trade 69% Asia about 59% Africa a mere 18% now the World Economic Forum hopes that by 2040 with the help of Possibly continental free trade area that this will double By 2040 how ambitious is that? Look, that's clearly ambitious, but not impossible But I think we we need to all acknowledge and celebrate the fact that as the rest of the world is Raising barriers and building walls Africa has decided to embrace trade and I think this is a great achievement is the right decision is the right You know move from our leaders and I agree with you know in the minister Tito It is certainly one of the biggest Achievement of our African Union since its inception now for it to Really become a force of economic transformation. We still need to work extremely hard There are issues of you know Non-tariff barriers as the governor mentioned we need to build infrastructure needed for Trade in traffic and trade to actually take place But it is another very important dimension I actually see two very important dimensions on which we need to be working extremely hard the first is building intra African value chain You know regional value chains And that's where the jobs will come from we need to actually you know work extremely hard in allowing a Spatial distribution of activities across the continent Acknowledging that not a single country will be able to produce all the goods that they need The second very important element we have to work hard about on is is the free movement of people And what has happened in the past week is not very reassuring This is actually one of the most important agenda moving forward if free trade The free trade agreement is to lead to an increase in intra Africa trade But let me just add one thing Chris on on your question on on how do we really ignite? Higher or sustained growth. I think You know to really solve that question we need to get to a deeper understanding of sources of growth on the continent Yes, number of African countries are still growing very very fast, but it is clear that our growth is very very volatile and The reason our growth is volatile is because our largest economies all are all Commodities dependent so we need Serious structural change we need transformation in our economies switching sources of growth from agriculture and mining and oil Towards more service and manufacturing for countries that can still do it So that structural transformation is needed. Mr. Ken. Yeah, one of the questions that people have about this continental free trade area Is how it's going to work particularly when it comes to payments and settlements for goods across borders But you already have an idea of how it could work with its existing infrastructure Yes, we can I think that it's all well to talk of a continental payment system But payment systems are run by central banks. We do not have a central bank yet For the continent, so we must make and do with what we have So there are three big payment systems Regional payment systems on the continent. There is the East Africa payment system There is the West African payment system and there is the Sadaq RTG as the Sadaq RTG as by 2017 had cleared 3.7 trillion rents of Wealth of transactions it had cleared over 700,000 transactions and had more than 88 participating banks It's a basis and Once we are still dreaming of an a continent wide payment system Let's do with what we have and the community the conversation amongst us as central bankers is that we can get these three platforms to actually connect and And think with each other and build that as a Basis for the settlement of trades is the infrastructure that is there It's waking it's proven and all that you need is to make sure that it is It is connected. Yes, the Sadaq RTG as is by far the biggest I mean it clears more transactions than all the other two put Put together but We can we can connect we can connect this system and who will we will be commencing with the pilots was the end of this year It's a race to the top It's which two will connect faster than other than trying to wait and get all three connected at the same time So I've got question for you How long you're assessing the situation? How long do you think it might take for this? Continental free trade area to be to be born bearing in mind it took Europe half a century and still it's not quite The trading area that they hoped for There's a lot of paperwork to be done Some some of the reports I'm reading saying maybe decades, but what do you think? I? think you know it's a journey and It took 13 months, you know for the agreement to be Sign up by 54 countries. They've crossed the 22 country mark for ratification and July 2020 is the effective take of date So it's a journey and you would find that different countries at different states of readiness In terms of making sure that they begin to phase out their tariffs They improve Ability to get visas in East Africa for instance, you know, you don't need visas to move around as well as in West and and Sadek, so It's going to be a race those who prepare early I believe would be the winners and It's a journey that we would continue to try and I'm hopeful that the a you would have clear metrics By which they can track progress and more importantly hold themselves accountable to Albert I mean one of the the promises of this free trade area is free movement of goods and skills and services Laudable surely, but isn't there a problem some of these trading blocks that the best people can be sucked Into the biggest economies with the most money. Isn't that a danger for the continent as a whole? Chris My sense my sense is, you know Free movement of skills comes with free movement of people So the first thing or the next agenda from my perspective for the EU Passport they've been talking about I think that's the first step if we are really serious in implementing this agenda because you know as we move to the digital economy as we move to you know as we move to To implementing this disagreement We cannot think of an economy based in services that does not allow free movement of people I think this is the most important you know point now will that lead to people moving and concentrating to Different countries very likely, but if we are thinking Africa instead of thinking countries Which is the principle under which we have embarked on this journey Then this shouldn't be such a worry the worry would be are we as Africa? Claiming a bigger share of world trade. Yes or no are we as African actually trading more Within the continent are we actually creating the kind of value chains within the continents? That will generate the millions and millions of jobs needed by our youth and our women our girls I think these are the questions I mean sure love I come back to you quickly A lot of people I've been talking to here at the World Economic Forum said this isn't the time for nationalism This isn't the time for economic nationalism. It's laudable to me. That's the hope of the world But I don't know how likely is it you think that there can be this joint political will to see through this very important Move in the economics of this continent, right? Well, we've seen the political will to actually get the agreement ratified. I think What we need to see more on the continent is better economic governance, and I'm hoping that you know as the Governments come together as they understand the implications of bringing down barriers driving intra Africa trade that Ability to improve economic governance to strengthen our institutions We will have the political will to put that in place and Mr. Gignac or so that there's a lot of paperwork to be done yet putting things in place measures in place What do you think is going to be the greatest challenge you think for this continental free trade area? I'm yet to think of challenges. I would like to think of the opportunities it offers and as we Take advantage of the opportunities. We will figure out what the challenges are the one thing that we need to bring to the fore is that it's a lot of talk of Countries trading with each other and that is the problem that you would have with the balance on the panel but it's Private companies that are trading with each other. They just happen to be coming from particular countries and so Coming to grips with what the challenges are going to be Means that there's got to be a conversation that involves African companies that are doing trade with other companies on the african continent to say to them Tell us what are the barriers that you are facing and what is it that you would like you would like? cleared that is That is one thing the second thing is that There is a lot that we are going to have to have to deal with here african continental trade agreement How do we deal with a Trade as I said the continent must trade with the rest of the world. They are going to be people with not such cool Intentions who would want to take advantage of these things. So setting down the ground rules is going to next to be the next Important thing to look to look at and the point though Is that the people who said the rules are the ones who are elected by the public not the kind of But show up again from the finance side of it one of the big Gaps that need to be filled is this transport infrastructure too many countries in the past They had a railway to the port and that was it. We now need infrastructure Across all african countries private public partnerships are being seen as the way out. How do you see it? Absolutely. I mean sdg 17 is partnerships To achieve the goals and the reality is that the public sector Does not have sufficient capital to deliver the infrastructure that is required on the continent We know where debt levels are that therefore means that there has to be collaboration With commercial banks with dfis the export credit agencies with philanthropic organizations with venture capitalists equity providers and The only way you can get all these stakeholders working together is when you have A clear Regulation and legal framework You must have Governance that is transparent One of the best examples I like to refer to is the south african the renewable independent power procurement process the office whereby They publicly stated their renewable plan Over the next five to ten years There was transparency in terms of the licensing bids and therefore the private sector had the confidence To invest in renewable energy About 14 billion dollars has come in through that Program and that's a model that can be replicated So clear rules a governance structure and bringing all the different Parties together is how we will be able to attract the much needed capital and the point about Having conversations private sector public sector is so critical Because the concerns of each of the stakeholders how the risks are going to be shared is important It has to be a sustainable project. The tariffs have to be cost reflective You know, so those are the conversations that have to be had and you then put in place A platform by which these funds can come in Oh, but how do you see that the flow of investment here? I mean because one of the the Fascinating promises of this is that you can invest in one country and have access To, uh, you know 50 odd others. I mean like like in europe How do you think that could ignite capital flows into this continent? I I believe you know the You know free trade agreement will certainly boost investment on the continent and I believe it's It's going to be Really helpful in boosting public private partnerships And I think it's so important because By some estimations africa needs more than 90 90 billion dollars per year for investment and if you factor in public investment and and and and and current provisions of Resources we we still left with 48 billion dollars gap in infrastructure and Just to give you a nod of magnitude the whole wall bank Ida window, which is the concessional window for the the the poorest country has mobilized 45 billion dollars for africa for three years and that has been the record Which means if we invested the the whole idea resources In one year it wouldn't even be enough to close the financing gap for infrastructure in africa So so it is it is crucial For us to actually you know walk extremely hard to bring in those You know those those public private partnership bring in private finance in infrastructure, but what is Also important to notice grace is this is still a very small market in africa We have four countries in africa that represent more than 48 percent of all the ppp's It's south africa, nigeria, kenya and uganda 48 percent of all ppp's So the market is still extremely small And it is my belief that the implementation of the continental free trade agreement will boost those Private funds into infrastructure. I know the infrastructure gap. It's one of the Things you've spent a lot of time studying. Uh, mr. Kinyaku. Well, what do you think the answer is? Do you think it's public private partnerships? Uh, it's not one answer you you're going to need a commitment of Of public resources, you will need the public private partnerships But you might also just want to open for the private sector to come and play in that in that space Point here is that if we think that we're going to close this i mean Sure, we will take advantage of the ida resources That is not going to be a the big game changer The big resources are in the in the private sector and what we should be thinking about is how do we mobilize private sector resources Not just from the african continent You've got to be of asking ourselves the question What is our value proposition to hold us of capital from elsewhere in the world that we could actually be attracting that capital Into our our projects and that for me if you change the conversation and start framing By saying look, we understand this thing that there are these gaps But the answer is not going to come from just the official resources official resources can go this far But we actually need to mobilize Private sector capital not just local but globally Shola also one of the other Things that have been raised about this continental free trade area that it'll be a boon for small businesses For entrepreneurs, it'll help them attract investment and also help them to grow How do you see that panning out? I think africa is primarily driven by small and medium enterprises traders small businesses and Right now you find they're constrained Very constrained access to affordable finance Logistics moving their money around moving their resources around Um, we recently partnered with um, afintech calls Sona so manini and what they do is they provide Financing to the small informal trader they allow that small trader to stock up To access credit to get financing using mobile payments doesn't have to leave his shop doesn't have to leave his outlet and What all the regulators all the policy makers should be focused on Especially on the back of the free trade agreement is how do we enable these small entrepreneurs? How do we give them the financing they need? How do we make it easier for them to run their businesses? How do we enable the Unemployed the large youth population that we have to be able to start up Businesses and to actually run with it and with digital infrastructure in place We are seeing it's easier For these young people for these small businesses to grow on the back of telecommunications on the back of Access to financing that can be given digitally. So I think that the convergence of all of this will certainly help To drive Africa's growth and to enable the small and medium entrepreneurs to actually grow their businesses Albert if I could put that question to you as an economist This massive youthful population growing up in this continent great assets also if Hands are left idle. It could also be a great threat to stability as an economist How would you approach getting the continent to work through this free trade area? Chris My office just produced a a book on the future of work in in in Africa and I think I think it is important to highlight that you know having a youthful continent Is a huge opportunity, but a huge threat as well It's a threat if we do not get that population to start really working and the future of work It will have in Africa to have a digital content And I think it's important to really emphasize the fact that the work of tomorrow Is going to be driven by digital transformation and we need to first invest in Digital infrastructure that is actually lacking on the continent We estimate that if Africa could just close its digital infrastructure gap We could actually boost GDP on the continent by a factor of 2.5 percentage point It is important to invest in digital infrastructure on the continent So that's one the second is investing in digital skills as well And digital skills are not just engineering coding skills This starts from the education system at lower level It's about teaching all the soft skills the collaboration The teamwork skills, you know, which are not necessarily always present in our education system So those these digital skills are going to be absolutely critical But the other important element on Making our youth more productive in Africa is to think of structural transformation moving out of subsystems agriculture We have now a report at the World Bank showing that poverty is actually essentially in Africa Essentially a subsystems agriculture problem 80 percent actually 83 percent to be precise of our poor in sub-saharan Africa live from subsystems agriculture If we are to solve the problem of, you know, and productive employment We need to transform our agriculture We need to move away from subsystems agriculture towards a you know, agricultural that is actually You know more agribusiness than than subsystems and and this again I see the potential for the continental free trade agreement To allow Africa to fit itself Most of those subsystems farmers can grow If they have larger markets if they can actually have the right infrastructure to access those markets across the continent And that certainly I hope would happen Which brings us smartly to our next Theme the fourth industrial revolution one of the big themes here at the World Economic Forum So if I could come to you, I want to talk about exactly how it could change the game again Just the other day I was interviewing a gentleman from Angola here and He telling me a story which I couldn't have believed when I first come into Angola in 1994 to report on the war The country was virtually obliterated. He was saying that they're putting undersea cables So farmers in Brazil can control the irrigation of their crops in their fields in Angola, which is unbelievable It's something that I found amazing. How do you think this is going to come more and more into the world of economics and business here in Africa? Yeah, I think the fourth Industrial revolution is going to disrupt all sectors. You know, that's clear and But it's also an opportunity and I think Africa needs to take advantage of that opportunity We raised some financing for M. Coppa solar. It's a it's a solar off-grid company run out of Kenya and they've been able to connect 500,000 homes with off-grid solar panels and You know, the the consumers pay as you go They are they've raised we raised 55 million dollars for them and they intend to increase that To 1 million homes, you know add another 1 million homes to that and that is a combination of Finance and technology renewable energy And they are achieving what? It very easily what, you know, the large energy infrastructure projects Haven't been able to achieve. So I think technological disruption is good in every single sector and hopefully it will help us to better address and find solutions to the many problems we have on the continent The fourth industrial revolution is upon us What changes do you see for good or ill? I take you to the words of Amina Muhammad the Deputy Secretary General of the UN who is here. She said the picture Has shadow as well as light when it comes to fourth industrial revolution. How do you see it? I see a lot of light At the point here is that every big revolution that we have seen can look at the the previous ones and say that The elements of the next one are always getting seen in the previous one and I don't know it would be a matter of time before we start talking about the fifth industrial revolution There might be elements of it already In the fourth industrial revolution. Well one sees lots of opportunities and I think that for the continent The early aspects of it and the biggest was the continent actually leapfrogged that actually been in financial in financial services in many respects Africa became a leader in Mobile payments and all of that stuff and in those respects, I think the example that was given earlier You are going to see that kind of leapfrogging Taking place. I think that the important thing for me Is the conversations that we are going to have with labor and organized labor because Many of them are in denial and they think that You are you can fight this in fourth industrial revolution instead of asking How do we embrace this and how do we engage with it With it differently and for me the way in which governments have got to think about it is to think about it like When you are doing a major structural reform program that once As a whole We will be winners. There are going to be some losers And so when there are some losers How do you take care Of the losers because they could actually potentially cause trouble and I want us to move from the logic that says that Which is the logic advanced by like By organized labor to say that you must protect jobs. We are already facing unemployment. I unemployment Let us protect the jobs. You can't protect jobs. You can't protect jobs. It's just a wrong approach We can protect people and that is what we should be focusing on And saying that in the transition as the fourth industrial revolution sets in there are people There are skills that are disappearing because they are no longer relevant And what programs what interventions do governments put in place to transition people from the old jobs To the new Skills in the fourth industrial revolution and if our focus is going to be we must protect jobs Then we are going we are going to fail We can protect people and that is what we need in order to make the transition I'll if I come to you as an economist I mean I think mr. Kaniyahu is right the unions The labor movement sorry is not likely to be very kind when it comes to the fourth industrial revolution I was looking at some world economic forum research yesterday said for every job lost 1.79 jobs will be created. I think I don't know what 0.79 of a job is but I'm sure the labor movement is not going to be that much. How do you see that playing out because as you know It's very very strong on this continent. That's right Chris the the research we just completed and published in this future of work Is actually pointing to the fact that there is more light than shadow in fact in fact We find that You know the fourth industrial revolution will create more jobs than It will destroy on the continent of Africa and there are many reasons for that And and I may not get into all those details, but but you should read the book for sure But but but you know, we do find that You know, there are a couple of myths to dispel here First is to think of that fourth industrial revolution as something that will come in the future It's already here. Africa is already leapfrogging and if you don't believe me ask the people in the financial sector in Kenya Ask the people in the health sector in rwanda and ganna how The digital is disrupting the way people work the way with deliver services, right? So it's already here and it's happening Second myth is to think of that fourth industrial revolution as a sector As opposed to existing ones as opposed to manufacturing or opposed to agriculture or orders It's in fact the case that Digital transformation is a cross cutting phenomena that has the potential to raise productivity across sectors So even if you are in agriculture and even if you are illiterate Digital transformation can actually increase your productivity That's what we are finding and we're doing a lot of research and a lot of work that's going to be you know Again, probably should in the next year We are finding a lot of hope That digital transformation will create more jobs in Africa than it will destroy But there is one concern craze my biggest concern about The digital transformation and the fourth industrial revolution in Africa is is it going to be done without Africans? or What role will african companies african start-up african inventors play? To me, that's the biggest challenge of solar. I mean we've been mentioned here in the financial sector It's growing as far as just give us your take on it and and how it is changing already our world yes, I mean big disruption and Everybody is trying to get into the financial services sector But you know, it's a huge opportunity as well and we are collaborating With our competitors as well as competing with our competitors. We recently invested in founders factory africa which is an incubator accelerator for fintechs on the continent and already their fintechs who are devising solutions Under founders factory africa in garner in nigeria in uganda in kenya You know across the health sector across education And and it's exciting you go to kenya and the whole ecosystem They call it the silicon savannah is enables the growth of innovation And and and technology so we think it's exciting and you know, there will be winners and losers, but ultimately Efficiency is up costs are lower People experience greater value And and therefore I think that It's a momentum that is built in and the important thing is to make sure that You know as the convergence continues The whole world really is going to be operating on platforms and you have to get on that platform Well, unfortunately we've run out of time, but one last quick comment from yourself, mr. Kenyac on this fourth industrial revolution I think that one of the things that is understated is the impact that it would have On the efficiency with which Governments can deliver public services and I think that for me it's a it's a big issue We have a we had a pilot project in south africa that we called a project coca Where we used blockchain technology in our payment systems space And the south african payment systems clears a couple of trillions of rents a day and We were able to clear The amount of transactions that we clear for the whole day. We were able to clear them in 90 minutes Now think of the efficiency gains from that and what it would actually mean and this was in the wholesale market But if we were to roll that out across the country think of the speed with which people could actually move money and the risk the reduced risk of settlement in the payment space Well on that hopeful note. We close. Thank you very much to my esteemed guests. Let's get to kenyacho the governor of south africa's reserve bank shawla david bohar of the ceo of the standard bank And albert zufak the chief economist for africa from the world bank and for me chris bishop the editor of cmbc africa It's thank you very much for watching and goodbye