The Africa Brief Team is juggling holidays and flights this August, but there’s some interesting news, so let’s jump right in.

Graphic of the Week 

Where are Africa’s Data Centers?

• Two weeks ago, we covered Africa's dearth of data centers and its negative impact on Africa's ability to benefit from the AI revolution. 

• This week, we take a closer look at this narrative and examine a more in-depth take from the Atlantic (12-minute read), which highlighted how innovators "are harnessing AI in surprising ways to address challenges and harness potential in three key areas: agribusiness, finance and transportation."

AI in the Context of Africa: 

• Africa has the potential to capitalize on the benefits of AI, but currently lacks the computing power, energy storage, transmission lines and data storage to do so. 

• If no intervention occurs, Africa is expected to gain only $400M in added GDP as a result of AI due to poor connectivity and digital infrastructure.

• In the meantime, innovators are working hard to leverage the tools AI provides to solve unique African problems. 

Here are three examples of AI driving innovation in Africa:

• In agribusiness, AI-powered weather forecasting from companies like Amini (Kenya) and Google’s AI for Weather Forecasting (Ghana) is helping farmers make better decisions amidst climate change, despite challenges related to data scarcity and bias in AI models.

• In finance, AI is enabling the creation of digital identities for the unbanked, allowing access to financial products like micro-loans and insurance. Platforms like M-Pesa and Yabx (Uganda) are using AI to assess creditworthiness and facilitate microinsurance for farmers. Nearly half of sub-Saharan Africans lack formal financial accounts (Global Findex Database).

• In transportation and logistics, AI is being used to improve the efficiency and reliability of services, with startups like Jetstream Africa automating supply-chain management thus expanding access to transport services for small and midsize businesses. 

Too Long; Didn’t Read

• Ethiopia: Ethiopian Airlines, Africa’s largest carrier with 154 planes, has been honored with the U.S. President’s Lifetime Achievement Award (Further Africa); Ethiopia's currency devaluation, where the birr has plunged 44% against the dollar since July, delays Safaricom's break-even goal (Bloomberg).

• Uganda: Uganda’s Central Bank cut its benchmark interest rate by 25 basis points to 10% for the first time in a year (Bloomberg).

• Kenya: Kenya's infrastructure bond auction will be a critical test of investor confidence amid recent protests and credit downgrades (Bloomberg).

• Mozambique: Mozambique's National Petroleum Institute has signed five of six contracts from its latest hydrocarbons tender (Further Africa).

• South Africa: Johannesburg's unreliable power grid is pushing wealthier residents toward solar energy, while poorer communities face rising electricity costs and inadequate infrastructure (Bloomberg); South Africa’s new unity government is proving stable and boosting business confidence (FT).

• Egypt: Magnom Properties plans to construct Egypt's first clean hydrogen-powered tower in the new capital, marking a $1B investment aimed at attracting international clients and advancing the country's green energy ambitions (Reuters).

• Africa: China's investment is boosting African lithium production, which is set to supply 14% of the global market by 2028 (Bloomberg).

Business & Finance in Africa 

Investors Come Back to South Africa

• Foreign investors rush (back) into South Africa: The introduction of a business-friendly coalition government in South Africa and Anglo American's plans to spin off its platinum subsidiary and possibly list De Beers are expected to spark a rally in the country’s stock market, which has been stagnant for over a decade. 

• In the May 31 edition of the Africa Brief, we highlighted Colin Coleman’s (Columbia Business School professor and friend of the Africa Brief) interview on Bloomberg TV where he stated that South Africa could boost growth by shifting from a largely debt market to an equities market. The country’s new leading coalition could be putting this transition in motion. 

African Airlines on the Move

We recently covered the rail race in East Africa, but clearly, the competition isn’t just on the ground. The competition in the skies will likely drive better connectivity and economic growth across the continent.

• Ethiopia: The Ethiopian Government has signed a deal with Dubai-based engineering and consulting firm Sidara to design the continent's largest airport near Bishoftu, which is set to handle 110 million passengers when completed in 2029. 

• Kenya: Kenya also wants to upgrade Jomo Kenyatta International Airport to meet East Africa's rising demand. 

• Rwanda: Meanwhile, Rwanda is advancing with Bugesera International, aiming to become a regional hub.

Nigeria and Ethiopia Continue to Tackle Tough Fiscal Reforms

This week, the Economist covered two of Africa’s largest economies and their tough reform agendas. 

• On July 29, Ethiopia floated its currency and Nigeria had “10 days of rage” protests against the government’s fiscal policies.

• Both governments are shifting from interventionist policies to orthodox free market economic approaches. However, these countries face significant challenges, including high inflation and public discontent. At the same time, these reforms are seen as crucial steps towards stabilizing their economies and attracting investment.

Uganda’s Central Bank Cuts Rates

• Last week, Uganda’s central bank reduced its benchmark interest rate by 25 basis points to 10% due to lowered inflation forecasts, marking the first cut in a year.

• The bank expects inflation to remain below the 5% target in the short term, supported by stable demand, lower imported inflation and exchange rate stability. This adjustment positions Uganda as an outlier along with Kenya among African central banks, many of which have either raised or maintained rates amid inflationary pressures.  

Cocoa Supplies Are Rebounding but Still Face Pressure

• Hot and dry weather in Ghana is hindering efforts to boost cocoa production, as flowers and pods on farms in the southwest (a key production area) are withering. Ghana is the world's second-largest cocoa producer after Ivory Coast. 

• JP Morgan Chase reported that climate change and underinvestment are driving global cocoa supply shortages. Scarcity is also driving investor speculation which has been pushing prices higher. However, the price is expected to settle in the near term.

Angola Targets New Bond Sale

We have been covering a lot of stories about debt in Africa lately and the trend is continuing. Check out last week’s brief for a deeper dive into the history of debt in Africa. Just as important, Angola is now considering selling Eurobonds under favorable market conditions, following the example of several other African nations that have recently raised overseas debt. The country’s Secretary for Finance and Treasury, Ottoniel dos Santos, mentioned that international markets are becoming more accessible for countries like Angola, though current interest rates are still too high to justify immediate action. Angola is carefully monitoring benchmark rates in the U.S. and Europe, as issuing Eurobonds could increase its debt burden. Despite a recent decline, U.S. Treasury yields remain significantly higher than their long-term average, making borrowing more expensive.

Other countries that have sold bonds this year: 1) Ivory Coast: $2.6B; 2) Kenya: $1.5B; 3) Benin: $750M; 4) Senegal: $750M; 5) Cameroon: $550M.

Nigeria to Launch a Private Fund to Finance the Missing Middle

• FCMB Asset Management Ltd. in Lagos is raising NGN 100B ($63M) for Nigeria's first private credit fund to support midsize firms in the missing middle. 

• What is the missing middle? According to the fund, large corporate companies can access loans from banks easily, while small companies can utilize microfinance institutions. However, midsize companies are stuck. They remain too small for large banks but too big for MFIs.

• The fund will target pension funds and institutional investors seeking positive real returns amid high inflation and low yields. 

Kenya’s President May Revive Aspects of the Finance Bill

• Kenya's finance ministry is planning to reintroduce some tax measures from the scrapped Finance Bill 2024. 

• The original bill led to deadly protests that resulted in the deaths of at least 62 people, forcing Ruto to back down from it in June. We covered the protests here. 

• Before reintroducing these proposals, Ruto’s new government aims to consult the public extensively to avoid further backlash. These measures are part of efforts to meet revenue targets and reduce debt, as required by an agreement with the International Monetary Fund, but will avoid directly reintroducing the controversial bill.

Climate in Africa

SA Struggles to Fund Green Energy Upgrades

• South Africa's plan to expand its power grid to support the transition from coal to renewables is facing challenges in securing the $21B needed for the project. 

• Despite a shift in policy favoring renewables, the near-bankrupt state utility Eskom struggles with high debt and lacks the financial capacity to undertake the necessary grid expansion, which is critical for transmitting renewable energy sources to urban centers. Efforts are being made to involve private investors and international donors, but significant hurdles remain.

Peace & Security in Africa 

Tensions Heat up in Central Africa

• Tensions are also heating up around Central Africa as DRC, Rwanda, Uganda and even Burundi are on the brink of a renewed conflict, reminiscent of the devastating war from 1998 to 2003 that involved nine African nations and resulted in millions of deaths. 

• Tensions have escalated due to disputes over DRC's vast mineral resources and longstanding political and ethnic rivalries, with recent cross-border clashes and aggressive rhetoric from leaders. 

• International and regional efforts to mediate the crisis have so far failed, raising fears of another large-scale war that could further destabilize the region and displace millions more people.

Europe in Africa

Ukraine’s Fighting in Mali Underscores the West's Struggle for Influence in Africa

• Ukraine's involvement in assisting Tuareg rebels in northern Mali to defeat Russian Wagner forces, which led to the deaths of 84 Wagner fighters and 47 Malian soldiers in July, has strained its diplomatic relations in Africa, leading to a backlash from regional powers like ECOWAS and individual countries such as Senegal. 

• This military success against Wagner may undermine the goodwill Ukraine has been building through peaceful diplomacy across Africa, while strengthening Russian favorability in the region.

China in Africa

China is Still Driving African Lithium Surge to Lock in Key Battery Metal

• Chinese companies are significantly increasing African lithium production, with the continent projected to supply nearly 11% of global lithium this year and more than 14% by 2028. 

• This surge is driven by Chinese investment in countries like Zimbabwe, Mali, Namibia and Nigeria, as China seeks to secure critical battery metals amid global supply challenges. 

• While Western companies are also investing in African lithium, the continent's rising output is reshaping the global lithium market, reducing the dominance of traditional suppliers like Australia, Chile and China, a good growth opportunity for Africa.

Sports in Africa

South Africa’s Springboks Deliver a Brutal Reality Check with Win Against Australia

• South Africa's Springboks defeated Australia’s Wallabies 33-7.

• Despite a late consolation try by Australia, the match highlighted the significant gap between the two teams, with South Africa showcasing their power and experience.

Explorations in Africa 

Tunnel To Connect Africa with Europe

• Forget air travel. Soon you might be able to take a five-hour train ride from Madrid to Casablanca. 

• Morocco and Spain are pushing ahead with a groundbreaking $6.6B underwater tunnel project that will connect Africa with Europe just in time for the 2030 FIFA World Cup. 

That’s it! Our version of Africa in Brief. We are looking forward to September and returning to our normal routine. See you next Friday.