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“Transforming Africa’s Agriculture through Industrialization and Inclusive Finance”
Your Excellency, Deputy Prime Minister, President of KEXIM, Honorable Ministers, Business Leaders from Korea and Africa, Distinguished Ladies and Gentlemen.
I wish to welcome you all to this Public-Private Partnership event. Once again let me thank H.E the Deputy Prime Minister and Minister of Strategy and Finance, Mr. Yoo and the Chairman and President of the Export-Import Bank of Korea, Dr. Lee, for your excellent reception and hospitality since we arrived here in the beautiful city of Seoul for the 5th KOAFEC Ministerial Conference.
Thank you also for organizing this landmark event today. This is the first time the private sector forum is being organized at a KOAFEC meeting. That is an excellent development!
The spirit of this conference is to look beyond partnerships, towards co-prosperity. I am very pleased that we have in this hall today top business leaders from Korea and Africa, joining a large number of Ministers of Finance from Africa – along with KEXIM and the African Development Bank. I cannot think of any more powerful group to make co-prosperity happen than you all here today.
As you all know, the African Development Bank has set five priorities for Africa: Light up and power Africa; Feed Africa; Industrialize Africa; Integrate Africa; and Improve the Quality of Life for the People of Africa. In all of these areas, we need public-private partnerships to succeed.
So, let’s talk about co-prosperity and how we can forge stronger public-private partnerships to make this happen between Korea and Africa.
It all has to start with investments. There exists a great scope to expand trade and investment between Korea and Africa. I would like to encourage Korean businesses to invest more in Africa.
Much progress has been made in Korea-Africa trade since 1990. Korea’s export to Africa increased from $892 million in 1990 to $9.9 billion in 2014. Korea’s imports from Africa also increased from $383 million in 1990 to $8 billion by 2014.
But a lot can be done, when one looks at the relative share of Africa in trade and investments with Korea. For example, exports from Korea to Africa represents only 1.5% of its total exports in 2015, while Africa exports to Korea represents only 1.2% of total exports.
The bulk of imports from Africa are largely raw materials such as petroleum oils, natural gas and copper. There is need for more value added exports from Africa to Korea – and Korea can help Africa in the development of regional and global value chains for processing and adding value to its exports. This will help reduce Africa’s exposure to global commodity price volatilities, while expanding trade with Korea.
Total FDI outflow to Africa from Korea is $2.4 billion – but Africa accounts for just about 1.2% of Korea’s total investment outflows. Some Korean companies are doing well in Africa. Samsung, for example, is investing $1.6 billion in the construction of Liquefied Natural Gas carriers in Nigeria. Mining sector and construction accounts for a significant share of investments by Korean firms in Africa.
Why should you invest more in Africa?
By 2050, Africa will have the combined population of China and India today. Rapid urbanization and growth in the middle class population – estimated to increase from the current 350 million to close to 1.1 billion by 2060 – means that Africa would be a huge consumer market. Consumer spending in Africa is projected to double to $1.4 trillion by 2020.
Business and investment opportunities are favorable. According to the World Bank’s Doing Business Index, 30% of the business regulatory reforms done globally in 2015 occurred in sub-Saharan Africa. As a result, foreign direct investments inflows to Africa are projected to reach $55-60 billion in 2016. Africa is still the second fastest growing destination in terms of foreign direct investments, second only to the Asia-Pacific region
How can Korea better support Africa to accelerate business and investments?
Korea can support Africa in the development of special economic zones and industrial parks, especially for light manufacturing, through public-private partnerships. Korea’s successful experience in agricultural transformation puts it in a competitive position to support Africa’s push for agro-allied industrial development. This could include investments in the development of rural infrastructure, agro-industrial complexes, post-harvest management and processing and fertilizer manufacturing. There exists huge opportunities for Korea to share its remarkable successes with Africa through support for training, skills transfer and technology for the development of industrial value chains.
But for Africa to industrialize it must solve its perennial problem of lack of electricity. In March this year, I visited the Korea Electricity Power Company (KEPCO). I was very impressed with the quality of the power plant and especially its high thermal efficiency. Korea’s expertise in the energy sector can form the basis for a Korea-Africa Energy Partnership.
The African Development Bank will be investing $12 billion in the energy sector in the next five years and expects to leverage $45-50 billion. Our goal is to achieve 160 GW of grid-based power, connect 130 million persons to the grid and provide an additional 75 million people with access to electricity through off-grid power systems.
KEPCO and other Korean power companies can play a major role in the emerging energy sector revolution in Africa, especially to support the development of smart grids, renewable energy, power generation and transmission, as well as providing technical and financial support for the turnaround of power utilities.
To help create jobs for Africa’s youth, the African Development Bank has launched the Jobs for Youths in Africa, with the goal of helping African countries to create 25 million jobs for the youths within the next ten years. The focus will be on agribusiness entrepreneurship development, ICT and development of new generation of computer coders for Africa.
Given Korea’s strength in computer systems development, Korean companies could partner with African governments and the African Development Bank in the establishment and promotion of digital centers of excellence, as well as in the development of skills for assembly of computers and development of computer software. Public-private partnerships can be used to establish venture capital funds, with public funds going into knowledge and skills development.
The African Development Bank and Korea Export-Import Bank’s co-financing facility of $600 million can help support Korean private sector business investments in Africa, in these and other areas of mutual interest, where Korea has interest and comparative advantage.
African countries will be interested in the development of small and medium sized enterprises. They can be linked to large corporates operating within specific industrial clusters to allow for skills, capacity and technology upgrade and to improve their overall competitiveness. The African Development Bank and KEXIM can support partial risk guarantees, partial credit guarantees to reduce investment risks for Korean businesses investing in African countries. The partial risk guarantee will reduce the risk of defaults by governments, while the partial credit guarantees will reduce risks of default by private sector on transactions. We can also jointly support trade finance to promote greater volumes of trade between Africa and Korea.
The KOAFEC Trust Fund can support several of these areas, especially agriculture and rural development, ICT, human resources development, knowledge sharing of Korea’s development experience and infrastructure development.
I am pleased that yesterday we signed letters of designation for co-financing with KEXIM for four countries, Kenya, Uganda, Tanzania and Ethiopia. In Kenya, we expect to provide up to $25 million to support the development of multipurpose water resources. In Uganda, our focus will be on providing $30 million to support agriculture and forestry conservation programs. In Tanzania, we plan to provide $50 million to support the construction of the power transmissions grids. And in Ethiopia, we will work jointly to provide $50 million for the development of Agro-Industrial Parks.
We must do all that is possible to accelerate the development and implementation of these projects, while at the same time expanding private sector investments by Korean businesses in Africa. To facilitate this, the Asia Regional Office of the African Development Bank will organize series of Business Opportunity Seminars for Korean companies willing to do business and invest in Africa.
I am also very pleased to inform you that the African Development Bank will soon launch an Africa Investment Forum. The Forum will be designed to leverage global pension and sovereign wealth funds, private equity and venture capital funds, and private businesses to invest in Africa. I look forward to welcoming Korean businesses to this Forum.
Through strong public-private partnerships, I am convinced that we can deliver a new phase of Korea-Africa relationship: one that will allow Africa to achieve its High 5s and assure co-prosperity. Let’s, together, make that happen for Africa.
Thank you very much.