Trade between Singapore and Africa has blossomed in recent years, tripling over the last decade and now standing at an annual S$14bn ($10.9 bn). Julienne Chan provides this overview.
Singapore is poised to take a significant role in Africa’s development. Everyone has heard of China building a huge stake in the continent, but the island-state of Singapore is also paying close attention to fostering a strong economic partnership with Africa.
One of Singapore’s key advantages is that it enjoys a very positive image across Africa. Many of the continent’s leaders view Singapore’s story as a development exemplar.
Last year, it was reported that there were over 60 Singaporean companies operating in more than 50 African nations.
It is generally recognised that most of the sectors in which Singapore is a world leader are in fact those sectors that Africa desperately needs to develop, such as transport infrastructure (roads, shipping, harbours, airports), power, financial services, housing and utilities.
It should also be noted that Singapore can serve as a key gateway to and from Asia for Africa. Singapore’s trade with Africa has been growing relentlessly, at over 10% a year, reaching about $11 bn in 2013. Singaporean FDI into Africa now stands at over $16bn.
With six of the world’s 10 fastest growing economies, a population of over one billion that is expected to grow to four billion by 2100, and many other factors in its favour, Africa is poised for a breakout century.
And Singapore is poised to also seize the opportunity to establish a strong foundation for lasting partnerships.
Indeed, already a series of major Singaporean investments have been made.
Pavilion Energy, the energy arm of the sovereign wealth fund of Singapore, Temasek Holdings, has won a 20% share of Tanzania’s liquid natural gas with a $1.3bn bid, signing an agreement with Ophir Energy.
This deal will help Singapore diversify its supply of LNG to further help it to become one of Asia’s principal gastrading hubs. The first deliveries of gas are anticipated to be made in 2020.
And Hyflux, a leading water solutions company, along with Olam - a global agribusiness group that sources, trades and processes food and raw materials - are also among the Singaporean companies that have invested in Africa.
But it is not simply commerce that drives Singapore’s relationship with Africa. Over the past two decades, Singapore has trained more than 8,000 officials from Africa, recognising that good governance also creates the environment that stimulates economic growth.
African countries such as Rwanda, Egypt, Ethiopia, South Africa and Nigeria are making it easier for entrepreneurs to set up shop, so Singaporean companies are drawn to invest in the opportunities the continent presents.
And Singapore’s government is keen to sponsor this process. This year’s budget introduced three schemes aimed at encouraging local companies to ‘internationalise’ and grow their revenues.
These measures, costed at S$240m ($181m), consist of support for SMEs rising from 50% to 75% until 2018. Finally, the government is to introduce an International Growth Scheme, which will provide qualifying companies with a 10% concessionary tax rate. The scheme will expire in 2020.
As economic development takes off in Africa, so does the general standard of living in the continent. There is a growing middle-class consumer segment in Africa, and many of the world’s biggest corporations are paying close attention to this trend.
As Africa and international corporations that have identified opportunities there have the advantage of hindsight gleaned from the already industrialised nations, there is the opportunity for Africa to leapfrog in terms of infrastructure development and the installation of green technology.
This article was first published in African Business magazine, June 2015 issue. Copyright IC Publications 2015. Published under permission by IC Publications www.africanbusinessmagazine.com.