african trade agreements Archives

The second highly successful US Africa summit which has just concluded in Washington D.C. marks the beginning of a new chapter in US-Africa relationships.

Geopolitical shifts have created major dislocations in the international energy and fertilized markets, massively impacting emerging and developed marketplaces alike, highlighting the critical need for sustainable global food security solutions.

Indeed a new African food security renaissance is about to take place – As a critical world leading nation, the United States of America has promised to rise to the challenge as a genuine, engaged and powerful partner in the building of Africa as a sustainable food security powerhouse -And the Kanga Potash project is an integral piece of this critical equation.

After 5 years and over USD40m, the Kanga Project team has completed its Definitive Feasibility Study (DFS) and is now preparing to move to the execution phase to develop what is one of the most promising potash production projects in the world, taking place in one of the most strategic locations on the African continent.

The country is blessed with enormous undeveloped reserves of potash, abundant natural gas, as well as phosphate. Straddling the equator on Africa’s west coast, it is uniquely positioned to supply the African continent to the north, south and center, all areas which are geared to emerge as agriculture powerhouses.

The Congo is also perfectly located across the Atlantic to supply Brazil and the rest of the South, and North American continent.

The Kouilou Region of the Republic of the Congo contains billions of tons of proven reserves of potash-rich carnallite, which can be recovered to produce potash in an ecologically friendly way, through tried and tested mining solutions.

The Project Team has also proven the existence of ultra thick super seams which are unique to its licenses and which have never been seen anywhere else in the world.

These ultra thick seams have a dramatic impact on the cost of production of potash as it drastically reduces the amount of solution mining caverns required to recover the carnallite.

Finally, the Kanga License sits directly on the Atlantic coast with planned export facilities a few hundred meters from the ocean. Independent potash export jetty facilities erase traditional logistics nightmares which other suppliers might face. Kanga will thus be the lowest cost supplier to both continental and international markets.

The combination of a strategic geographic location and these unique super thick seams position Kanga as a key player in African and global food security integrity.

The government of the Republic of Congo, under the Leadership of its President, Denis Sassou Nguesso, who participated in the US-Africa Summit, as well as his State Minister of Mines, Mr. Pierre Oba, are highly supportive of fertilizer mining projects in the Congo. Recognizing the significant work completed by Kanga Potash, the government granted a production license to Kanga Potash in late July of 2022. The Minister’s teams have since been working diligently with Kanga Potash to finalize as expediently as possible the signing of the Mining Convention, which is required to begin work.

The Government has also adopted a development-focused policy and has been extremely supportive in negotiating a long-term gas supply agreement at viable prices.

For years, natural gas has been flared at great expense to the environment, with the Republic of Congo residing on top of vast natural gas reserves. The newly appointed Minister of Hydrocarbons, Mr. Bruno Itoua, has demonstrated critical leadership in implementing the President’s carbon footprint reduction policies, having imposed a strict ban on flared gas, which will be redirected to the development of domestic industries.

The Kanga team is in discussions with industry players and financial institutions who are working on reaching financial closure for the USD500m CAPEX project. The Project has completed a NI43-101 Report. The first stage of implementation and next phase of work entails front end engineering and the drilling of the first production well, which will not only be used to further strengthen its resource report with measured and proven reserves sufficient for life of mine at all production scenarios, from 200 ktpa right through to 2m+ tpa, but it will also be used as the first well in the extraction of carnalite for processing.

The African continent is on the cusp of long-term economic opportunity thanks to the inception of the African Continental Free Trade Area (AfCFTA), which came into effect in January 2021. The AfCFTA could boost Africa’s growth potential as the agreement intends to liberalize trade across Africa over the next few years. It provides optimism for a region that has been hit hard by the pandemic.

The impact of the pandemic has been uneven across African economies, with some suffering from severe economic contractions, while others managed to record small growth rates. The post-pandemic outlook differs from country-to-country, but most are subject to high uncertainty due to the rise in infections and the slow vaccination process. In the long run, the AfCFTA could be pivotal in Africa’s growth potential as the agreement foresees fundamental freedom of trade in Africa in the next few years.

The agreement has the potential to accelerate African growth rates after the negative impact of the COVID-19 pandemic, according to a recent economic outlook report for the Sub-Saharan Africa (SSA) region from trade credit insurer Atradius.

Early optics reveal uneven results

While long-term results of the implementation of the AfCFTA, the immediate optics are not looking promising for most countries. Some challenges have to be overcome before the AfCFTA is successfully implemented and countries can reap the benefits. In the short run, protectionist tendencies, insufficient capacity to expand cross-border infrastructure, political instability and weak government finances, among other things hinder a full implementation of the agreement.

The AfCFTA’s full implementation has a long way to go, with several countries needing to first establish the necessary customs infrastructure and required procedures to trade. Countries that already have action plans and customs procedures in place, as well as relatively low barriers to trade with other African countries, will likely see success early on. So far, only Egypt, Ghana and South Africa have accomplished the necessary customs infrastructure. Countries that are likely to benefit the most are those with relatively open and diversified economies and well-established trade links, like South Africa. This also applies to other regional trading hubs such as Kenya, Senegal and Cote d’Ivoire.

Economies emerge from harsh COVID effects

Last year’s economic contraction of 1% was the lowest ever witnessed in the region and was stark in comparison to average annual growth of 4.3% since 2010. COVID-19 hit African countries with a drop in trade, lower commodity prices, fewer tourist arrivals, lower remittances and lower foreign investments. Additionally, many countries introduced strict lockdowns in the beginning of the pandemic that hurt domestic economic activity.

Thankfully, 2021 has seen a recovery in the global economy and higher commodity prices, supporting the economic recovery in Africa. Economic growth is expected to reach 1.3% this year. A recovery that is quite moderate, especially in comparison to other regions in the world. Reasons for this are the limited room for government support and the slow vaccine distribution. Similar to other parts of the world, many African governments supported their economies resulting in high budget deficits and an increase in public debt. Now, many face high debt levels that will limit further support and even constrain public investments over the next few years. Therefore, many countries are not expected to return to their pre-pandemic growth figures. The economic outlook is also uncertain due the continued spread of COVID-19 coupled with the slow vaccination process.

Uneven recovery underway for Sub-Saharan Africa

While there is an economic recovery underway for SSA, it will be slow and mostly uneven throughout the region. Oil exporting countries, hit hard by the pandemic, like Nigeria and Angola, will see a particularly slow recovery. Small island economies dependent on tourism, like Mauritius, which recorded deep recessions last year will likely see one of the highest economic growth figures in Africa this year. However, this is still uncertain, as it depends on the expected gradual recovery in tourism.

The more diversified economies fared relatively well through the pandemic and will have a strong economic recovery. Countries such as Kenya, Ghana and Côte d’Ivoire recorded a small contraction or even a positive economic growth last year and are among the top performers.

Opportunities for the region could be on the horizon in the form of the African Continental Free Trade Area (AfCFTA). Although in the short term there is much to overcome, once it reaches full implementation on the longer term, it is set to benefit several African economies.

_______________________________________________________________

Afke Zeilstra is a senior economist for Atradius

Africa Is Taking Centre Stage In Food Security – And So Is Congolese Potash

most viewed today