Farmers in Africa and agri-businesses sector in Africa could be worth a trillion-dollars by 2030 if given proper access to more capital, electricity, better technology and irrigated land to grow high-value nutritious foods, and if African governments can work more closely with agribusinesses to feed the region’s fast-growing urban population, according to a new World Bank report. According to the Growing Africa: Unlocking the Potential of Agribusiness report, Africa’s food systems, currently valued at US$313 billion a year from agriculture, could triple if governments and business leaders radically rethink their policies and support to agriculture, farmers, and agribusinesses, which together account for nearly 50 percent of Africa’s economic activity. “The time has come for making African agriculture and agribusiness a catalyst for ending poverty,” says Makhtar Diop, World Bank Vice President for Africa region. “We cannot overstate the importance of agriculture to Africa’s determination to maintain and boost its high growth rates, create more jobs, significantly reduce poverty, and grow enough cheap, nutritious food to feed its families, export its surplus crops, while safeguarding the continent’s environment.” Agribusiness in Africa: Growth Prospects Due to a combination of population growth, rising incomes and urbanization, strong demand is driving global food and agricultural prices higher.  Supply issues – slowing yield growth of major food crops, slowdown in research spending, land degradation and water scarcity issues, and a changing climate all mean that prices will remain high.  In this new market climate, Africa has great potential for expanding its food and agricultural exports. Africa holds almost 50 percent of the world’s uncultivated land which is suited for growing food crops, comprising as many as 450 million hectares that are not forested, protected, or densely populated. Africa uses less than 2 percent of its renewable water sources, compared to a world average of five percent.  Africa’s harvests routinely yield far less than their potential and, for mainstay food crops such as maize the yield gap is as wide as 60 to 80 percent. Post-harvest losses run 15 to 20 percent for cereals and are higher for perishable products due to poor storage and other farm infrastructure.  African countries can tap into booming markets in rice, maize, soybeans, sugar, palm oil, biofuel and feedstock and emerge as major exporters of these commodities on world markets similar to the successes scored by Latin America and Southeast Asia.  For Sub-Saharan Africa, the most dynamic sectors are likely to be rice, feed grains, poultry, dairy, vegetable oils, horticulture and processed foods to supply domestic markets.  The report cautions that even as land will be needed for some agribusiness investments, such acquisitions can threaten people’s livelihoods and create local opposition unless land purchases or leases are conducted according to ethical and socially responsible standards, including recognizing local users’ rights, thorough consultations with local communities, and fair market-rate compensation for land acquired. “Improving Africa’s agriculture and agribusiness sectors means higher incomes and more jobs. It also allows Africa to compete globally. Today, Brazil, Indonesia and Thailand each export more food products than all of sub-Saharan Africa combined.  This must change,” says Jamal Saghir, World Bank Director for Sustainable Development in the Africa region. Value Chains in Africa Rice: Africa has become a major consumer and importer of rice, and Africans import half the rice they eat and pay top dollar for it, $3.5 billion per year and more.  Ghana and Senegal are significant importers.  Senegal is competitive among its neighbors, but it is held back by the difficulty farmers have in accessing land, capital, finance for irrigation expansion and appropriate crop varieties.  Ghana produces fewer varieties of rice than Senegal, but at significantly higher cost, and levies 40 percent tariffs and other charges on imports. Poor grain quality, cleanliness and packaging are major deterrents for consumers constraining the sector’s performance. Maize: A food staple for many Africans, maize is grown on 25 million hectares or 14 percent of cropped land. In Zambia where people eat on average 133 kilograms of cereals a year, maize provides half the calories in their diets.  Zambia is competitive when importing maize but fails on exports.  High transport costs, higher labor costs and lower yields combine to increase costs by one-third compared to Thailand, a major international producer of rain-fed maize.  The report argues that Zambia’s future competitiveness depends on raising yields, reducing costs, and removing disincentives for the private sector in markets and trade. In addition, the study reviewed value chains for cocoa in Ghana and dairy and green beans in Kenya. “African farmers and businesses must be empowered through good policies, increased public and private investments and strong public-private partnerships,” says Gaiv Tata, World Bank Director for Financial and Private Sector Development in Africa.  “A strong agribusiness sector is vital for Africa's economic future.” Agriculture Sector in Africa Agriculture and agribusiness should be at the top of the development and business agenda in Sub-Saharan Africa. The report calls for strong leadership and commitment for both public and private sectors.  As comparators, the report cites case studies from Uruguay, Indonesia and Malaysia. For success, engaging with strategic “good practice” investors is critical, as is the strengthening of safeguards, land administration systems, and screening investments for sustainable growth. Africa can also draw on many local successes to guide governments and investors toward positive economic, social and environmental outcomes.

More than a century ago, when the old Port of Djibouti was built by the French colonisers, it was connected with a railway that linked Addis Ababa to Djibouti City. Given the size differences of the two countries – today Ethiopia’s population is more than 100 million, while Djibouti’s is less than 1 million – the port was never about trade with Djibouti, but trade with Ethiopia. It is no coincidence that today, the new Doraleh Container Terminal is the end of the line for the new Chinese-built Addis-Djibouti standard gauge railway. Djibouti had little going for it when it became independent in 1977, but by exploiting its geographic position and putting into place well thought-out policies, it has developed into a global trading centre.  Djibouti’s position as the main entrepôt for Ethiopia was cemented in 2017 when the new Ethiopia-Djibouti Railway was completed. It replaced the ageing colonial-era line and reduced freight transport times between Addis Ababa and the Port of Djibouti from 50 hours to 12 hours. The Tadjourah-Balho-Mekele road, a highway connecting Djibouti and Ethiopia was recently inaugurated. The inauguration was attended by Djibouti president, Ismaïl Omar Guelleh, Ethiopian minister of transport and other dignitaries. The 120km road is set to connect the new Tadjourah port of Djibouti, dubbed a third corridor to the small town of Balho the city of Mekelle the capital city of Tigrai, Ethiopia. The Tadjoura Port has been built to mainly focus on general cargo, such as livestock, sesame, frankincense, fertilizers and grain. Historically, one of Djibouti’s strategic advantages has been its stability. In an inherently unstable part of the world – its other neighbours include Eritrea, Somalia and Yemen – Djibouti represents a relatively low-risk investment destination. But Somaliland is providing competition on this front. If trade from Ethiopia dries up, ships will no longer be queuing at sea for their turn to dock at these ports. This is significant because there are two separate situations that threaten the trading relationship between Ethiopia and Djibouti. The first is the brewing political crisis in Ethiopia. Djibouti Port: Promoting Trade With Ethiopia The government of Djibouti is determined to strengthen the country’s position as the premier port site in the Horn of Africa. Ethiopia is seeking to diversify its range of port options and has signed deals to use Port Sudan in eastern Sudan and the emerging port of Lamu in Kenya. The World Bank estimates that Djibouti’s GDP grew by 7.2% in 2019 and predicted growth of 7.5% in 2020 and 8% for the 2021-23 period. These figures are likely to be downgraded as a result of the coronavirus crisis but the country’s long-term economic prospects look very sound. The economic base is already beginning to widen with the emergence of construction materials and food processing sectors. Under Vision 2035, the government aims to create a more diverse economy by developing a digital technology hub, promoting light manufacturing export processing zones and improving national infrastructure, as the port and logistics sector continues to grow. Plans have also been drawn up to attract investment in financial services, tourism and renewable energy. Concrete targets have been set, including creating more than 200,000 jobs and tripling per capita income by 2035. Tadjourah-Balho-Mekele The US $156m road project was financed by the Kuwait Fund for Arab Economic Development (KDEF). The new highway will go through the Djiboutian border town of Balho intercepting the road to the port of Assab in Eritrea which used to connect Ethiopia to the sea and will go through Afar to Mikelle the capital city of Tigrai. In 2017 Djibouti opens a new port at Tadjouran in North-Central Djibouti, which is equipped with cutting edge facilities, including a potash handling system with a capacity of 2,000 tons per hour. The port is developed in conjunction with other major infrastructure works in the region, including the North Tadjourah-Balho corridor highway, and the proposed expansion of Djibouti’s railway system with a new northern corridor railway. Port of Tadjourah, in the north of the country, is the closest outlet for Ethiopia’s Afar and Tigrai regions, where a number of companies are developing potash mines. Tigrai Online has received relevant information that the extremist Amhara groups were actively working with the help of the Egyptian government to undermine the completion of the Tadjourah-Balho-Mekele road. The enemies of Tigrai desperately tried to sabotage the construction of the new highway to cut off Tigrai from the sea and limit it to be only through Addis Ababa-Woldiya-Mekelle and then they turned around and closed the federal highway connecting Addis Ababa and Mekelle. Highway connecting Djibouti and Ethiopia The construction of the highway will help relieve the congestion of commercial traffic between the port of Djibouti and Ethiopia. The new road will also cut down the travel time for trucks going from Djibouti to Afar and Tigrai states substantially. Since the new road doesn’t go through the Amhara regional state the difficulty, robbery, road blockage, and other illegal activities against any transportation systems will be eliminated. The brand new Tadjoura Port is built to mainly focus on general cargo, for example livestock, sesame, frankincense, fertilizers and grain. Around 97pc of Ethiopia’s import-export cargo has been coming through Djibouti's ports since the 1990s. The rest are shipped through Port Sudan and Berbera, respectively. Until last year, imported freight of Ethiopia stood at 13.5 million tonnes, while exports reached more than 1.8 million tonnes a year. Ethiopia had been using Assab and Massawa ports in Eritrea, both of which are close to the northern parts of the country before the late 1990s until diplomatic relations between the countries deteriorated. Trade with Ethiopia The fast-growing Ethiopian economy has accelerated traffic through the Port of Djibouti, with the volume of containers handled rising from 176,453 in 2002 to 854,851 in 2014, according to figures by Djibouti Ports and Free Zones Authority (Autorité des Ports et Zones Franches Djibouti, APZFD). Figures also show an average of 1500 transport trucks crossing the border daily between Ethiopia and Djibouti, with this expected to climb to as many as 8000 trucks by 2020. Currently, the shipping cost of bringing a twenty-foot equivalent unit from Shanghai into the Port of Djibouti is around $600 and takes 14 days, with an additional $750 and two days needed to take the container all the way into Addis Ababa in Ethiopia, according to figures by the APZFD. However, freedom in determining the price for freight forwarding in Djibouti led to a discrepancy in prices, with prices charged for Customs and port procedures varying from between DJF18,000 ($100) to DJF40,000 ($225), according to figures by the APZFD. To prevent price variability from impacting the competitiveness of the Djibouti-Ethiopia corridor, the government established fixed prices for these operations in 2015, with the new regulations enforced from January 2016. Road congestion has been a major problem when linking cargo transport between Djibouti and Ethiopia but work is afoot to shift traffic off the road, and onto a recently rebuilt railway line. The 753-km Chinese-financed railway link will be able to transport up to 3500 tonnes per voyage between the countries – seven times the maximum capacity of the previous line – and cut travelling times to around ten hours, from the current average of two days it takes trucks. Speaking to media in 2015, Getachew Betru, chief executive of state-owned Ethiopian Railways, described the project as a “game changer,” adding, “It will be one of the most vibrant economic corridors in the world.” Djiboutian officials hope the railway will eventually be extended to South Sudan, the Central African Republic and Cameroon, connecting the Red Sea and the Atlantic Ocean. Longer term, officials hope to build on the country’s geographical position, abutting markets in the Middle East, North Africa and East Africa, along with its transport links by developing special economic zones, where foreign companies will be able to assemble goods. New Pipeline Another project set to ease overall cargo transport will be the construction of a 550-km pipeline between Djibouti and central Ethiopia. The $1.55bn project will be used to ship refined petroleum products, which have been typically transported using tanker trucks. The new infrastructure will have the capacity to move 240,000 fuel barrels per day. “The energy pipeline is likely to improve road congestion and will create more room for logistics companies,” Reuben Ahronee, director-general at Massida Group, a local logistics operator, told OBG. Djibouti is a key transhipment centre and the main seaport for Ethiopian international trade since it is strategically located near the busiest sea routes in the world, controlling access to Red Sea and the Indian Ocean. Upon completion the highway is expected to relieve the congestion of commercial traffic between the port of Djibouti and Ethiopia. The new road will also cut down the travel time for trucks going from Djibouti to Afar and Tigrai states substantially. Moreover, since the new road doesn’t go through the Amhara regional state the difficulty, robbery, road blockage, and other illegal activities against any transportation systems will be eliminated.

In today’s Ethiopia, gold is the mineral that is the biggest hard currency earner for the country. Although Ethiopia exports other minerals including sapphire, opal, tantalum, emerald, gemstones, and marble, gold has become a focus for Ethiopia a priority sector to transform the country’s economy. The government of Ethiopia wants to use the sector as an engine of growth to propel the country’s economic growth. It hopes to create one million jobs in the sector and generate over a billion dollar annual export revenue. It would be no exaggeration to say that Ethiopia’s gold potential could rival South Africa’s, which would put it somewhere around the top five gold producing nations in the world. Ethiopia has seen astonishing growth in the last ten years. Growing at an average rate of 10.2% between 2010 and 2020, the country is consistently one of Africa’s top performing economies. The country’s Growth and Transformation Plan II is targeting an annual average real GDP growth rate of 11%. Ethiopian industry is projected to grow at an annual average rate of 20%, with projected growth of 21.9% in the manufacturing sub-sector; 31.6% in electricity, gas and water; 15.4% in construction; and 32.8% in the mining sector. Large ore based gold mines are the Lega Dembi (the largest mine in the Sidamo province of southern Ethiopia) and Sakaro, which have been mined by private companies; the amount of gold produced by these mines is reported to be about 5 tons per year. The National Mining Corporation (NMiC), an Ethiopian private company, had earlier announced the discovery of the largest ever gold and base metal reserves in Oromia and Tigray regional states. The mining corporation estimates that the 550,000 kg gold reserve at Dawa Okote, in Oromia Regional State is worth almost $US 5 billion. The gold reserves discovered at Werri, Tigray Regional State have estimated gold reserves of 18,000 kgs expected to be worth US$ 792 million. Gold in Asosa Region In the wester part of Ethiopia near the Sudanese border lies a place called the Asosa zone – one of the oldest gold mines in the world dating back some 6,000 years. The gold mines in Asosa provided a key source of gold to the ancient Egyptian empire, whose great wealth was famous throughout the world. It may even have supplied the Queen of Sheba with her lavish gifts of gold when she visited King Solomon almost 3,000 years ago. More substantial exploitation of the region’s riches dates back to the Italian invasion of the 1930s. The Italians explored the Welega gold district in West Welega, south-east of Asosa. Haile Selassie, emperor of Ethiopia from 1930 to 1974, believed the country had the potential to become a global leader in gold. But when the revolutionary Derg government deposed him and the country plunged into civil war, gold mining disappeared off the agenda for a decade and a half. It took until the early 2000s before the government started awarding exploration licences. The area is heavy in quartz veins, schist, and pegmatite rocks, which are all promising locations for gold deposits. Similar terrain in Papua New Guinea and Indonesia has already been found to be rich in the yellow metal. Some local inhabitants of Asosa already make a living from prospecting gold, and several mining companies have been active in the area in recent years, too. But what comes next could be on a much bigger scale. New geological research suggests that much more treasure might be buried under the surface of this east African country than was previously thought. Treasure Trail The Asosa zone is made up of flatlands, rugged valleys, mountainous ridges, streams and rivers. It is densely vegetated by bamboo and incense trees, with remnants of tropical rainforests along the river valleys. The zone, which is part of Ethiopia’s Benishangul-Gumuz region, is spotted with archaeological sites containing clues to how people lived here thousands of years ago, together with ancient mining pits and trenches. Local inhabitants have long taken advantage of these riches. They pan for gold in Asosa’s streams and also extract the precious metal directly from outcropping rocks.  Several mines are up and running. One is at Lega Dembi slightly to the east, owned by Saudi interests. The other, at Tigray in the north of the country, is owned by American mining giant Newmont, and just started production late last year. If you’re looking for a mining destination with the right mix of mineral potential, stability, infrastructure development and government support for investors – consider Ethiopia.

Kenya's economy largely relies on the agriculture sector. Horticulture sub-sector is one of the top foreign exchange earners for the country generating approximately US $ 1 billion annually. The sub-sector contributes roughly 1.25% to the national GDP while flower exports contributes nearly 1% from the flower industry. It has grown in significance to a vibrant flower industry worldwide. The flower industry is also one of the largest employers in the country, providing employment to over 100,000 people directly and an estimated 2 million people indirectly, mostly women. It is estimated that in Kenya, over 500,000 people, including over 100,000 flower farm employees depend on the floriculture industry impacting over 2 million livelihoods. The main production areas in Kenya are around Lake Naivasha, Mt. Kenya, Nairobi, Thika, Kiambu, Athi River, Kitale, Nakuru, Kericho, Nyandarua, Trans Nzoia, Uasin Gishu and Eastern Kenya. The main cut flowers grown in Kenya are roses, carnations, and Alstromeria. Other flowers cultivated include, Gypsophilla, Lilies Eryngiums, arabicum, hypericum, Statice, a range of summer flowers amongst many others. Kenya is the leading exporter of rose cut flowers to the European Union (EU) with a market share of alsmost 40%. Approximately 50% of exported flowers are sold through the Dutch Auctions, although direct sales are growing. In the United Kingdom, supermarkets are the main outlets. Over 25% of exported flowers are delivered directly to these outlets, providing an opportunity for value addition at source through sleeving, labelling and bouquet production. Kenyan flowers are sold in more than 60 countries. Europe accounts for nearly 70% of Kenya's cut flower exports and coronavirus restrictions had slashed daily orders by half, threatening thousands of jobs in East Africa's richest economy. The biggest buyers of cut flowers are the EU and the US, but the biggest growers and exporters are the Netherlands, Ecuador, Colombia, Kenya and Ethiopia. Roses, carnations and chrysanthemums are the most popular blooms. Kenya’s Flower Industry The industry continues to attract investors due to solid infrastructure, favourable climate, global-positioning of Kenya and a productive workforce. It comprises large, medium and small scale producers who have attained high management standards and have invested heavily in value addition through adoption of modern technology in production, precision farming and marketing. The farmers utilize technologies some of which includes drip irrigation, fertigation systems, greenhouse ventilation systems, net shading, pre-cooling, cold storage facilities, grading, bouqueting, fertilizer recycling systems to prevent wastage, wetlands for waste water treatment, artificial lighting to increase day length, grading/packaging sheds, and refrigerated trucks. On the global front, a growth of 5% is anticipated every year over the next five years. To be a part of this opportunity, Kenya is going to continue investing and expansion in growth rate than previous years. Going forward, the industry will continue benchmarking itself against other producer countries. Information thus gathered will be useful in formulating strategies, to capture prospects of expansion in current and emerging markets. Kenya Flower Council (KFC) The Kenya Flower Council is a voluntary association of independent growers and exporters of cut-flowers and ornamentals, established in 1996, with the aim of fostering responsible and safe production of cut flowers in Kenya with due consideration of workers welfare and protection of the environment. Against this background the Council has become the focal point for industry representation, promotion, and compliance to pertinent local and international standards deemed necessary to secure, expand and sustain markets.

As African countries pursue industrialization, the Chinese-built industrial parks and free trade zones have been gaining momentum in the socio-economic drive of the continent, some significantly accelerating the process of industrialization and job creation. Located about 40 km south of Addis Ababa, the Eastern Industrial Zone (EIZ), built and operated by Chinese companies, is widely viewed as the benchmark for the development of industrial parks in Ethiopia. A decade ago the land the Eastern Industry Zone currently lies on was just agricultural land, but with hard work it has today become a showcase of high quality industrial factories in sectors such as pharmaceuticals, pulp and textiles. The industrial zone was inaugurated by Ethiopian Prime Minister Abiy Ahmed, Djibouti's President Ismail Omar Guelleh and Sudanese President Omar al-Bashir who traveled to Ethiopia's western town of Jimma, approximately 350 kilometres west of Addis Ababa. At the ceremony, Ahmed said the park would help with the industrialization process of Western Ethiopia and create a large number of jobs for young Ethiopians. According to Ethiopia's Industrial Parks Development Corporation (IPDC), the park will create some 12,000 direct jobs for Ethiopians. The EIZ, Ethiopia's first industrial zone, has provided more than 10,000 jobs for local people. Developers are given income tax exemption for 10 years if building an EZ in Addis Ababa (and its surrounding special zone of Oromia), but for 15 years if EZs are built in other regions. The duration of land leasing is also longer for EZs in non-capital areas. In addition, a full exemption of customs duty on spare parts is granted to manufacturers who exclusively engage in export-oriented production, while partial exporters can receive exemptions only on parts equal to 15% of the total value of the capital goods. Manufacturers who export 80% of their products can enjoy additional years of income tax exemption. Moreover, priority is given to investment in agro-processing, textiles and garments, leather and leather products, sugar, chemicals, metal and pharmaceuticals. Although bidding for zone construction is open to both local and international contractors, in practice, local companies can hardly compete with the more experienced and financially resourceful Chinese counterparts. The IPDC is reported to prefer awarding projects, from design to construction, to contractors who come with their own financial sources. Other bidder qualifications include a minimum annual turnover of 6 billion Ethiopian Birr, prior experiences of building at least two EZs, and a sound local business record. Thanks to the industrialization driven by industrial parks, Ethiopia's gross domestic product remained at a growth rate of above 8 percent between 2010 and 2020, creating an economic miracle on the African continent. As Ethiopia envisions building 15 industrial parks in the coming few years, it is estimated that the parks alone will produce more than 150,000 direct jobs. In the 40-hectare Eastern Industrial Zone, Chinese shoemaker firm Huajian Group produces for brands like Guess, Calvin Klein, Nina and other branded items. Huajian Group has already raked in more than $35 million in foreign exchange income for Ethiopia. The Eastern Industrial Zone (EIZ) in Ethiopia is part of the story of how China has built overseas trade and economic cooperation zones in Cambodia, Vietnam, Pakistan, Zambia, Egypt, Nigeria and elsewhere. It is estimated that Chinese companies have built 75 zones for economic and trade cooperation in 24 countries along the Belt and Road routes, contributing more than $2.2 billion of taxes and creating almost 250,000 local jobs. Manufacturing in Ethiopia Being Africa's second most populous nation, Ethiopia has an abundant workforce. More than 70 percent of its 100 million population is estimated to be under the age of 30. As the East African country is exploring ways to realize its demographic dividend while transforming its agriculture-dominated economy towards a manufacturing hub of Africa, China's development model of industrial parks has been considered as an option. Currently, 15 industrial parks are in the pipeline across Ethiopia, most of which are being constructed by Chinese companies. Six of the industrial parks have officially gone operational in the past few years, attracting a large number of transnational companies from China, India, South Korea and other countries. Ethiopia now exports shoes produced by Huajian to European and American markets, while many of the taxis on the streets of the Ethiopian capital and other cities are assembled by Lifan Motors. The EIZ is Ethiopia's first industrial zone and has inspired the government to establish more such parks in the country. "These industrial parks are vital elements of the infrastructure supporting the structural transformation in Ethiopia that can attract institutional investors," said Costantinos Bt. Costantinos, an economic advisor to the African Union (AU) and the United Nations Economic Commission for Africa (ECA). Industrial Parks, Free Trade Zones Across Africa Free trade zones and industrial parks in Djibouti, Nigeria and South Africa also created jobs for local citizens and promoted the economic development of these countries. Besides Ethiopia, Djibouti, Kenya, Nigeria and South Africa, Chinese-built industrial parks and free trade zones, which are key to attracting investors, have taken root in many other African countries. Djibouti A Chinese-built international free trade zone was inaugurated in Djibouti, a country with a population of nearly 1 million. At the construction site of the free trade zone, a tall modern office building has been erected. Some 70,000 square meters of warehouses and 65,000 square meters of storage yards have also been completed. With a planned construction area of 48.2 square kilometres, the free trade zone occupies one-tenth of the country's available land area and has attracted more than 25 companies that have decided to operate from the free zone. Nigeria In the Western African nation of Nigeria, the construction of the Lekki Free Trade Zone is also progressing steadily. The free trade zone is invested, constructed and operated by the Lekki Free Trade Zone Development Company. The zone incorporates, among others, oil and gas warehousing, furniture manufacturing, garment production, trade logistics, engineering construction services, industrial real estate, automobile assembly, steel structure processing and manufacturing, steel pipe production, daily necessities and other industries. South Africa South Africa is an important platform for investors to enter the African market because it is one of the most developed countries in the region. In 2013, Chinese consumer electronics company Hisense and the China-Africa Development Fund teamed up to inject $33 million to build a home appliance industrial park in the Atlantis area, about 50 km west of Cape Town. Latest statistics show that the TV sales market share of Hisense in South Africa has reached 25.1 percent, ranking first in the market. It is followed by refrigerator sales which account for 24.2 percent of the total market share. As of July 2018, its annual TV production capacity is about 400,000 units, while the refrigerator production capacity is about 400,000 units annually. All in all, the mutually beneficial cooperation between China and South Africa in the park has impressed everyone – except for the usual critics who see China as a threat to the traditional hegemony of the western world over the African markets.

Kenya has emerged in recent years as one of the fastest growing economies in the world. Given the strategic importance its coastal city Mombasa plays and the favourable regional trade memberships, Kenya has often been referred to as the key economic and commercial hub of East Africa. Services sector being the key growth driver, improving transport infrastructure and ongoing pro-business reforms continue to underpin the notable economic development of the country and offer a wealth of opportunities for businesses and investors. The Kenyan economy, largest in East Africa, has achieved considerable growth in recent years. The annual real GDP growth has averaged about 5.5% since the 2008 financial crisis, a rise that reflects the country’s continued economic stability and significant improvements in its business environment.  Agriculture remains the backbone of Kenya’s economy, accounting for about one-fifth of the country’s GDP, with coffee, tea and horticulture being its important export earners. While manufacturing makes up just 10% of Kenya’s GDP, developing this sector remains an important strategy for Kenya, which the government sees it as a crucial engine for sustaining economic growth and development, job creation and poverty alleviation. Under Kenya’s Big Four National Economic Transformation Agenda, it seeks to increase the GDP contribution of the manufacturing sector to 15% by 2022, with particular emphasis on boosting sub-sectors such as agro-processing and textiles and clothing. The services sector has been the key driver of Kenya’s economic growth, accounting for almost two-thirds of the growth in GDP over the last five years.[2] Tourism is one of Kenya’s most important industries and is a key foreign exchange earner. With its national parks, game reserves and other fine natural attractions, Kenya remains a natural tourism magnet which attracted almost two million visitors in 2018. Trading and financial services have also been important in driving the country’s economic development, supported by a relatively mature financial system and banking sector compared to other sub-Saharan African countries. In contrast to much of the rest of the continent, Kenya’s diversified economy and long history of private sector development has made it the most attractive investment destination in the region. Kenya is the second largest foreign direct investment (FDI) recipients in East Africa, with its total FDI stock stood at approximately US$15 billion in 2019, trailing behind its neighbour Ethiopia. Investors are encouraged to keep an eye on the country’s fast-growing industries, particularly those in line with the Big Four Agenda – manufacturing, food security, housing and healthcare. In recent years, Kenya has initiated a number of significant transport infrastructure projects intended to improve logistics efficiency and enhance its positioning as a regional trading and business hub. One notable example is the expansion work at the Port of Mombasa, the largest deep-water seaport in the East and Central African region.  Apart from serving the domestic market, the port also handles trade from landlocked neighbouring countries such as Uganda, the Democratic Republic of Congo (DRC) and South Sudan. In fact, Uganda is the biggest user of the Port of Mombasa, accounting for more than a quarter of the port’s cargo volume in 2020. According to Kenya Ports Authority, Port of Mombasa is the fifth busiest port in Africa. In order to meet the demand of capacity increase – averaging at 10% annually over the past decade – the Kenyan government has rolled out the construction of a second container terminal at the port, the Kipeuv Container Terminal. Phase one of the Kipeuv Container Terminal was completed and became operational in 2016. Completion of the second phase, which is expected in 2022, will augment the capacity of the port by an additional one million TEUs. To further facilitate trade and reduce traffic congestion between the Port of Mombasa and the country’s capital Nairobi, a standard gauge railway (SGR) was constructed and launched in 2017. Thanks to the SGR, traders are able to reduce as much as two-fifth of their freight costs, compared to transporting by road. The journey time has also been cut from 24 hours to a maximum of 8 hours.  The Mombasa-Nairobi SGR also offers passenger services, with two trains operating daily. Two years into its operation, the SGR has transported more than 4.4 million tons of cargo and offered services to 3 million passengers. Regional integration is one driving force behind the continued investment in transport infrastructure in Kenya. The Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) Corridor, a US$23billion multi-modal project, aims to provide better integration between Kenya, Ethiopia and South Sudan. It consists of six key projects, including a new port at Lamu in northern Kenya, inter-regional highways and standard gauge railway lines, an oil pipeline, new airports and the development of resort cities.  The Lamu Port, another deep seaport in Kenya, will mainly be a transhipping hub for cargo destined for ports such as Dar es Salaam in Tanzania and Maputo in Mozambique. Kenya is identified as one of the rising stars of global trade, according to the Trade20 Index. Its membership of regional economic blocs, coupled with its infrastructure and ease of doing business improvements, is further consolidating its position as a gateway to African markets. Kenya is a member of the Common Market for Eastern and Southern Africa (COMESA), the largest economic community in Africa, and the East African Community (EAC). Being part of these two regional economic blocs, which cover almost half of Africa’s population, provides Kenya with duty-free access to other member states while imposing a common external tariff on non-members.  In addition, Kenya has been at the forefront of the efforts to advance regional integration and form the largest free trade zone in the world – the African Continental Free Trade Area (AfCFTA). While Kenya has shown a strong commitment to facilitate free trade within Africa, it has also forged numerous trade relationships with other countries. Kenya is a beneficiary of the African Growth and Opportunity Act (AGOA), which allows duty-free access to the US market for over 6,000 agricultural and non-agricultural products, such as garments and textiles. In fact, the US was the third largest market for Kenyan exports in 2018, behind only Uganda and Pakistan. East African Community Kenya is the only EAC member to have ratified the EAC-European Union Economic Partnership Agreement on quota restrictions and allows zero-duty entry into the EU of all EAC exports. Although the Agreement is currently stalled with Tanzania’s concern over its impact on the industrialisation in East Africa, Kenya still enjoys duty- and quota-free access to the EU market under the Market Access Regulation. The wide market access provided under Kenya’s participation in numerous economic communities and agreements has offered a solid avenue for businesses looking to set up their bases in Africa. It is particularly attractive for manufacturers or exporters, who could take advantage to produce in Kenya given its quality transport infrastructure and competitive export procedures compared to its African peers, while enjoying the options to export to other African markets as well as mature markets such as the US and the EU. As well as being a trading hub, Kenya also serves as East Africa’s diplomatic and business centre. Multinational corporations such as General Electric, Google and Visa have all established their regional headquarters in Nairobi. The city is also the African headquarters of international organisations, such as the World Bank and the United Nations. Tech Hub of East Africa Known as Africa’s Silicon Valley or “Silicon Savannah”, Kenya is embracing the ICT sector as a key enabler for future economic growth. Launched in 2006 and updated a decade later, the National ICT Policy aims to ensure the availability of accessible, reliable and affordable ICT services while promoting innovation within the sector. The updated Policy also addresses a number of newer issues, such as cybersecurity, e-government and knowledge economy. The enabling policy and legal environment have seen the development of many innovations, including M-Pesa, a mobile payment and transfer system launched in 2007 by the leading Kenyan telecom operator Safaricom. M-Pesa has proved that even the most basic mobile phone can enable users to send, receive and store money. The application of M-Pesa has spread quickly and it now has over 37 million active customers across seven countries in Africa. Kenya is also home to more than 200 tech start-ups, as well as the regional headquarters of multinationals in the ICT sector such as IBM, Intel and Google. In Nairobi, Microsoft has opened an Africa development centre and Cisco, a supplier of networking equipment, has also set up an innovation hub.  Boasting one of the fastest internet speeds in the region given its undersea fibre-optic cables, Kenya is now characterised as a truly connected landscape. That, combined with the growing population with access to technology and increasing support from international investors, the Kenyan tech ecosystem offers an attractive space for investment and innovation. Businesses operating in Kenya stand to benefit from a host of incentives. The Kenyan government provides the right for foreign and domestic private entities to establish and own business enterprises. In an effort to encourage foreign investment, Kenya repealed regulations in 2015 that imposed a 75% foreign ownership limitation for firms listed on the Nairobi Securities Exchange, allowing such firms now to be 100% foreign-owned. Food Processing Besides the apparel sector, opportunities exist in the country’s agribusiness. Kenya is reputed for its cultivation of tea, coffee, grains and fruits. It is the largest exporter of horticulture in East Africa and the third largest tea exporter globally. Kenya also boasts of large herds of dairy cows which provide fresh milk for processing into pasteurised milk and other dairy products such as yoghurt and ice cream. Located near the Indian Ocean, this is also growth potential for Kenya’s aquaculture industry. In fact, the country has been exporting fish and seafood to international markets such as the EU, although aquaculture exports only accounted for less than 1% of its total exports. As the raw materials for food processing businesses are readily available and can be sourced locally, there is potential to expand value-addition production and food processing in Kenya. Not surprisingly, fishery and horticulture products are major exports from Kenya. As the world demand for Kenyan fresh food produce increases, there are untapped opportunities which can be matched with the expertise from internatonal companies with the aim of developing the fishery and agribusiness value chains in Kenya, particularly in cold storage facilities and refrigerated transportation for perishable food products, as well as quality packaging for food produce. To capture manufacturing and processing opportunities, one could consider Kenya’s export processing zones (EPZs) and special economic zones (SEZs). Both EPZs and SEZs offer a range of incentives to support low-cost and smooth operations and encourage foreign investment. These include measures such as a ten-year corporate tax holiday and exemption from duty and VAT.  Investors should note that the major difference between EPZs and SEZs is that EPZs aim to support export-oriented businesses, and therefore companies are required to export at least 80% of their output outside Kenya as well as the East African Community (EAC) region in order to operate in an EPZ. EPZs also target companies in particular sectors, such as food processing, textile and apparels, leather and commercial crafts and pharmaceutical and medical products. In 2018, there were 72 EPZs in Kenya, of which 67 were privately owned and operated. The wide market access which Kenya has achieved through its participation in numerous economic communities and agreements offers a solid avenue for manufacturers to produce their goods in Kenya, coupled with its quality transport infrastructure and competitive export procedures compared to its African peers. Despite Kenya’s manufacturing and export potential, businesses should take note of the operational challenges they may face.  The cost of labour in Kenya is uncompetitive as it has the highest monthly minimum wage in the region, which could be unfavourable for labour-intensive industries. Furthermore, import procedures are relatively lengthy, which may result in increased costs and delays for inbound freights.  Risks of Doing Business in Kenya As a note of caution, it is prudent here to point out that the Kenyan economy still remains vulnerable to volatility in external financial markets. As 2020 has shown, a substantial downturn in China, which is a major financier of Kenyan infrastructure projects, poses significant downside risks for investment into the country.  In addition, Kenya’s current account deficit will widen due to the COVID-19 pandemic in 2020 as tourism receipts and foreign remittances collapse due to the global slowdown. The shilling is also susceptible to periods of high volatility that can feed through into inflation and undermine investor sentiment. That said, Kenya dominates the East African Community trade bloc and serves as the region’s logistics hub, which will allow it to leverage the region’s rising prospects in the coming years.

The Kenya Association of Manufacturers (KAM) has released a new set of standards intended to improve the efficiency and accountability of importing into Kenya. KAM said that it has created the new Standard Operating Procedures (SOPs) guide, released on 18 November 2020, to facilitate trade and boost the fight against illegal imports in order to enhance the ease of doing business in the country. The SOPs are intended to serve as a reference for all government bodies assigned to ensuring efficiency and accountability in the inspection, verification and clearance of imported goods at Kenya’s ports and other entry points; as well as a guide for those involved in importation. The standard procedures embrace stakeholders such as freight consolidators, clearing agents, importers, the Kenya Airport Authority, the Kenya National Chamber of Commerce and Industry, shipping lines, PVoC agents, and KenTrade. There are also 29 industry bodies and government departments listed that are affected by the procedures cited in the SOPs document. These include such government authorities as the Kenya Revenue Authority; Kenya Ports Authority; the Ministry of Industrialisation Trade and Enterprise Development; the Department of International Trade; the Kenya Bureau of Standards; and the Kenya Railways Corporation. The guide lists operating procedures, from pre-shipment through inspection at ports of entry and subsequent cargo clearance, along with examples of international best practice and recommendations. The document’s foreword states: “Over the years, several importers have cited increased challenges faced during the importation process including: congestion at the ICDN; re-inspection of cargo that has already been subjected to Pre-Arrival Clearance in accordance with the PVoC Program; lack of harmonisation and configuration of the HS Codes used under the iCMS and KESWS systems; and the invalidation of import classifications at various ports/points of entry by customs officials, leading to delays in customs clearance and increased costs of importation.”

In 1896, the British colonial government began construction of a narrow-gauge railway line from the Kenyan port city of Mombasa to Nairobi. Today, the railway builders are back. This time, it is China’s economic integration strategy in East Africa that is behind the construction of a new rapid rail link between Mombasa and Nairobi. The new line, due to reach the Kenyan capital by 2018, will eventually extend to Uganda, Rwanda, Burundi and South Sudan. This is where China’s Maritime Silk Road ends and where its trade connectivity with the East African region begins. Africa in Focus The Maritime Silk Road, part of the Chinese government’s Belt and Road Initiative, will change the way China engages with its trading partners in East Africa – particularly Kenya and Tanzania and, to a lesser extent, Uganda and the Horn of Africa. Africa is a growing consumer market for Chinese products and, at the same time, a prime source of essential mineral commodities. Developing closer trade ties with Africa, via the Belt and Road, underpinned by investment in new regional infrastructure, is clearly a priority for China. It forms a key part of its broader international drive to restore momentum to its slowing economic cycle, primarily by gaining greater efficiency from its trade links. Several current Chinese infrastructure projects are focused on East Africa. There are also clear indications that China is prioritising infrastructure investments in the region, providing it with more efficient trade links and allowing it to take advantage of Africa’s improving economic conditions. Apart from the East Africa Railway, China is also financing several essential port developments, including a US$10 billion deep-water harbour in Bagamoyo on the eastern coast of Tanzania. With many African ports already approaching capacity, China sees port upgrades across the continent as a critical strategy to cement further trade agreements and open trade lanes. While sources of funding for specific projects are not always clear, China is financing many of these facilities through several institutions, including the Asian Infrastructure Investment Bank, the Silk Road Fund and, specific to Africa, the Forum on China-Africa Co-operation and the China-Africa Development Fund (CAD Fund).  At times, projects are funded from a combination of sources and it’s unclear to what extent any of the agreements is bilateral or continental in nature. Some analysts and scholars believe, however, that there is a direct connection between China’s maritime trade strategy and its military plans for the region. It has been widely reported, for example, that China is considering setting up a naval base in Djibouti – already home to the only United States naval base in Africa. It is also believed to have plans for Walvis Bay in Namibia. “Understandably, as Chinese economic engagement expands in Africa, it will inevitably intersect with security issues,” said Yu-Shan Wu, a researcher with the South African Institute of International Affairs. “The question is whether China’s presence could create areas for cooperation on peace and security issues in Africa, or whether it will be perceived as competition. At present, it is too soon to tell.” As its economy slows, China may also be looking to Africa as a cheaper manufacturing base for its more labour-intensive industries. In 2012, the Chinese-owned Huajian Shoes opened a factory in Ethiopia, which is keen to boost its level of industrialisation and attract foreign investment in manufacturing.  The project is now often cited as a case study of China’s interest in offshoring elements of its production to Africa. In recent years, there has been a notable increase in the number of funding sources for Chinese businesses looking to expand abroad. In Huajian’s case, it was the CAD Fund that backed its Ethiopian venture. Regional Integration The successful implementation of Chinese offshore manufacturing projects would greatly depend on the development path adopted by the African countries concerned. It would be influenced, for example, by whether individual nations were looking to move away from a resource-intensive growth model to a manufacturing-based economy. Some African countries need the necessary environment and investment that China is willing to provide in order to facilitate such industrialisation. East Africa is a key part of China’s ambitious integration strategy and its bid to engage its Belt and Road trading partners. What’s less clear, however, is the particular emphasis China will place on Africa in the long term or the degree to which its economic drive in Kenya and the region will benefit the wider continent. “Regional integration is a priority for Africa, and China seems to be addressing those concerns,” said Yu-Shan Wu. “It is up to individual African countries, however, to determine just what they want from China’s engagement. There could, for example, be potential for collaboration between Africa’s own regional initiatives – such as the North-South Corridor, an integrated continental transport programme – and the Belt and Road Initiative.” It could be argued that while China knows what it wants from Africa, Africa doesn’t know what it wants from China. But African officials eager to see a more economically integrated continent support closer links. “China is putting its relationships with Africa at a different level,” said Nkosazana Dlamini-Zuma, Chair of the African Union.  “African states are benefiting from their partnership with Chinese companies in a number of areas, including transport infrastructure integration, energy, broadband technology, and healthcare and disease control,” said Dlamini-Zuma. Reflecting this ambitious cooperation is an agreement between the African Union and China to connect African capitals through a vast network of road, rail and air transport routes, which will be built by China. The deal has been hailed as the most substantive project the African Union has ever signed. Professor Lin Jiang, Chair of the Department of Public Finance and Taxation at Hong Kong’s Lingnan University, believes both parties can benefit from China’s activities in Africa. “The African component of the Belt and Road Initiative offers a new type of opportunity,” said Professor Lin. “This is not just open to Chinese private enterprises, but also African countries that are able to collaborate when it comes to infrastructure development and manufacturing.” Win-Win Outcome China’s greater economic integration with Africa, though, is not without its challenges. Several countries in the region are among the world’s poorest, raising questions about whether China will see a return on its investment. Many of these initiatives – notably the East Africa Railway, which will see high-speed freight trains replacing a 120-year-old colonial railway line and massively reducing the cost of regional transport logistics – will undoubtedly help support economic growth and trade. For China, and Africa, it could well be a strategic win-win outcome.

With the Belt and Road Initiative poised to transform market access across Asia, potential partnerships with African companies are opening as they seek to target Asian consumers. In particular, many South African halal food producers have high hopes that Hong Kong could prove the ideal gateway for boosting their exports across the region. By 2030, the global Muslim population is estimated to number some 2.2 billion, representing about a quarter of the world’s consumers. This substantial demographic shift will result in increasing demand for halal products. The global halal food industry is estimated to be worth US$2.3 trillion, and South Africa is among many countries hoping to capitalise on this rapidly expanding market. Despite its relatively small Muslim population, South Africa is a world-leader in producing and – importantly – certifying halal products. The country’s exporters see Asia as one of the fastest-growing markets for halal goods; by 2030, it’s projected that Asia will be home to 80 per cent of the world’s Muslim population. “South Africa has long had a significant number of domestic producers of halal food,” said Ebi Lockhat, a spokesman for the South African National Halaal Authority, the country’s leading halal certifying body. “Those manufacturers are now starting to become active internationally. This has seen many of them attend trade events across the Muslim world, while looking to establish a firm presence in the international markets.” South Africa’s halal production system is subject to high certification standards, ensuring compliance with the requirements of Muslim consumers. Eating only properly-certified food is mandatory for practising Muslims, with such proof of compliance providing an assurance that all such foodstuffs have been produced according to Islamic law. In line with this, plans are now in place to further enhance South Africa’s position within the sector. This includes the launch of a government-backed US$67 million halal food-processing industrial park. This new facility will ramp up South Africa’s halal food export capacity, with the aim of doubling its share of the global market. A feasibility study is underway in the Cape Town area to determine the best location for the proposed park. When completed, the park will comprise a cluster of halal manufacturing and service firms. South Africa’s Western Cape provincial government also hopes to attract a globally recognised halal certifying body to operate out of the site. Halal Food Industry in Africa For the provincial government, growing the halal industry is now a key focus as it looks to boost growth and create new jobs in the region. “This industry is growing at an estimated annual rate of 20 per cent,” said Alan Winde, Western Cape Minister of Economic Opportunities. “This is why we are now looking for significant growth in the size of the province’s halal industry. “Certification is also hugely important. In addition to developing a guide to the current certification standards, we will work with the appropriate certification bodies in order to try and establish a single standard, one that is in line with global market demands.” The new park is being planned in collaboration with the Malaysian government, which has itself identified a shortfall in the provision of halal food for the world’s growing Muslim population.  As a result, the Western Cape Fine Food Initiative, another partner in the proposed park, and the Malaysian Industry Government Group for High Technology signed a long-term cooperation agreement to foster partnerships between the two countries’ halal industries. In the 1970s, Malaysia was the first country to set halal food production certification standards, which are still viewed today as a global benchmark. With Malaysia at the heart of the Asian halal market, South Africa’s halal producers are expected to greatly benefit from Malaysia’s experience and reputation in the sector. The Market for Halal Food China is also looking to increase its share of the global halal food market. This move has been partly spurred by the country’s adoption of the far-reaching Belt and Road Initiative. Significantly, many of the countries along the proposed Belt and Road routes have substantial Muslim populations. As a result, China is keen to match its export offer with the needs of its Muslim neighbours along the Belt and Road. Chinese companies currently export less than one per cent of the global total of halal foods, but want to substantially expand their share of the sector. Many Chinese suppliers, however, will be hampered by the poor reputation of the country’s domestic food industry. This leaves a clear opportunity for producers of properly-regulated and certified halal foods to work with distributors in the region. As a key player in the Belt and Road Initiative, African countries are ideally positioned to adopt a primary role in the processing and distribution of such produce, with South Africa keen to be its supply partner. The rand’s expected fall to an all-time low means that importers can buy South African products for about 33 per cent less than a few years ago. “Countries such as Malaysia, Singapore and China are critical markets for halal produce,” said Nazeem Sterras, Chief Executive of the Western Cape Fine Food Initiative. ASEAN, in particular, presents a huge opportunity for distributors, while the overall Asian halal market is estimated to be worth around US$410 billion annually.”

Home to a small population of less than one million, Djibouti is one of the smallest countries in East Africa, strategically located at the mouth of the Red Sea. With few natural resources and little industrial activities, Djibouti’s economy depends heavily on logistics services and trade through its international port.  In a bid to transform itself into a commercial trading hub for the broader region, the country has invested in projects across the road, rail, port and airport sectors. In particular, there has been an expanding economic footprint from China in the country, with many projects driven by the Belt and Road Initiative (BRI). Strategic Location in the Horn of Africa Djibouti’s strength lies in its strategic location next to Bab-el-Mandeb, the strait that connects Mediterranean Sea to the Indian Ocean via the Suez Canal, Red Sea and Gulf of Aden. The strait is one of the busiest maritime routes, with about 30% of global merchant shipping passing through every year. Given its advantageous geographical location and natural deep-water port, the country is becoming more important as a regional trading and transhipment hub in the Horn of Africa. In addition to capitalising on its strategic location, Djibouti benefits from being almost the sole maritime trade conduit for Ethiopia, Africa’s second most populated nation and an economic powerhouse in East Africa. Ethiopia’s economy has experienced strong growth in the past decade, at an average annual rate of 9.9%, compared to a regional average of 5.4%.  However, limited by its landlocked position, Ethiopia has relied overwhelmingly on Djibouti for logistics, which handled over 90% of its total trade in 2018. This allows Djibouti to leverage such dependence to its advantage, serving its strategic positioning as a vital gateway to the African market. The Port of Djibouti now serves as a key transhipment centre and a principal maritime outlet for imports and exports from the surrounding landlocked African hinterland. To expand its ability to serve as a platform and trading hub for African countries, Djibouti has invested heavily in port infrastructure in the past few years, with four new ports inaugurated in 2017, namely Doraleh Multi-purpose Port, Port of Ghoubet, Port of Tadjourah and Damerjog Livestock Port. Djibouti’s proximity to hotbeds of turmoil in the Middle East and Africa, as well as relative political stability, also makes it strategically attractive for military superpowers to set up bases here. The country hosts more foreign military bases than any other country, with military presence of the US, France, Germany, Spain, Japan and recently China. Improving Regional Connectivity: Addis Ababa-Djibouti Railway The role of Djibouti as Ethiopia’s gateway for trade is further enhanced with the new Addis Ababa-Djibouti Railway, a standard gauge international railway linking Djibouti and Ethiopia’s capital city. Jointly constructed by two Chinese state-owned enterprises – China Railway Group Limited (CREC) and China Railway Construction Corporation Limited (CRCC) – this 750 kilometre railway, which has been in operation since January 2018, is the first fully cross-border railway line in Africa. The railway is seen as a game-changer for both countries, which plays a pivotal role in improving regional trade and reduces road congestion. Given its landlocked status, Ethiopia’s imports and exports depend heavily on the port of neighbouring Djibouti, with most cargo previously transported to and from Djibouti by road. However, logistics inefficiency and poor transport infrastructure remained a bottleneck, resulting in congestion at the port of Djibouti or on the road. The opening of Addis Ababa-Djibouti Railway enables the carrying of far more cargo tonnage per trip and has cut travel time between Djibouti and Ethiopia’s capital, Addis Ababa, to just 12 hours, which the same trip by road could take at least three days. Besides cargo shipments, the new railway also offers a faster and more comfortable transport alternative for residents from both sides of the border. Djibouti International Free Trade Zone The launch of the Chinese-built Djibouti International Free Trade Zone (DIFTZ) marks a major step to enhance Djibouti’s position as a trading and logistics hub in East Africa. Costing US$3.5 billion, phase one of the DIFTZ was opened in July 2018, offering overseas companies a solid manufacturing and processing base in Djibouti, with access to port and utilities facilities.  Jointly operated by Djibouti Ports and Free Zones Authority (DPFZA) and China Merchants Port Holdings, the free zone houses several industrial clusters focusing on trade and logistics, as well as export processing. One-stop shop supporting services, such as customs clearance support, business registration and employees’ welfare, are also available within the zone. Transsion, a Shenzhen-based mobile phone manufacturer, which leads the African phone market with its Tecno brand, is one of the companies currently operating in the DIFTZ. Before setting up its base in Djibouti, Transsion manufactured mobile phones in mainland China, then shipped to Dubai via Hong Kong.  The final products were then transported from Dubai to major African markets, such as Ethiopia and Kenya by air. The expensive freight cost and long shipping time under this operation model has made Transsion shift its product assembly to DIFTZ with imported electronic components from the mainland and Hong Kong. Setting up an assembling line in Djibouti allows companies like Transsion to deliver products to African destinations faster, while achieving better cost efficiency. In particular, Djibouti is suitable for export-oriented and low-skill assembly manufacturing companies in sectors such as electronics, packaging and toys. DIFTZ presents an increasingly handy option for Hong Kong and mainland companies looking for export processing opportunities overseas and gaining access to the enormous East African markets. Despite Djibouti’s manufacturing and export potential, businesses should take note of the operational challenges they may face. Given its small population of less than a million, Djibouti offers relatively limited labour supply, which could be unfavourable for labour-intensive industries.  The country’s electricity cost is also one of the highest in East Africa, mainly due to its reliance on diesel and electricity imports from Ethiopia, where the cost of electricity is almost seven times lower than that of Djibouti.  China’s Economic Engagement in Djibouti In recent years, economic growth in Djibouti has been fuelled by large-scale infrastructure investments and a rapid expansion of trade activities. According to the International Monetary Fund (IMF), the country’s real GDP growth averaged close to 7% from 2014 to 2017 and is projected to grow at 6% in the next five years. Since 2014, the government has promoted investments in maritime facilities, free trade zones and railway infrastructure. This effort has been largely supported by the Chinese government and investors, which are playing a growing role in this tiny country. China has provided over US$1 billion in financing major infrastructure projects in Djibouti since 2000, including the Djibouti International Free Trade Zone, the Addis Ababa-Djibouti Railway, two airports and a water pipeline. China Merchants Port Holdings has also taken over the operation of Doraleh Container Terminal from Dubai-based port operator, DP World and helped to develop a multi-purpose port in Djibouti.  However, the investment boom has also been accompanied by rapid accumulation of sovereign debt, much of it is based on lending from Export-Import (Exim) Bank of China. Improving Business Environment Djibouti jumped 55 ranks in the World Bank’s 2019 Doing Business Index and now sits 99th globally. This East African state also ranked second out of the ten economies which show the most notable improvement in business environment. Over the past year, Djibouti has implemented several key reforms in improving the business climate, particularly on strengthening its legal framework. For example, the country has established a dedicated division within the court of first instance to resolve commercial disputes and adopt a new civil procedure code that regulates voluntary conciliation and mediation. Djibouti also implemented strict deadlines for registering property sale agreements with local tax authority and digitising its land registry. In addition to this is a relatively stable currency – pegged to the US dollar at a fixed rate since 1949 – and the absence of foreign exchange control. The relaxed foreign exchange regime, together with recent reforms, help lay the foundations for private sector led growth and strengthening investor confidence. Tourism: Attractive Proposition for Investors Besides infrastructure, Djibouti is also eyeing investment to boost its tourism industry, which accounts for only 3% of its GDP. Djibouti benefits from a number of niché attractions, including sandy beaches along the Red Sea, salt lakes, volcanic fields and popular underwater diving sites.  Visitors from European countries are the main sources of Djibouti’s international arrivals, although regional tourism from neighbouring countries such as Ethiopia, the UAE and Eritrea accounted for as much as 40% of arrivals. Djibouti is also gaining popularity among visitors from Asia, including China and Japan, as well as the USA. However, the leisure segment is still insignificant, with majority of foreign visitors coming for business trips only. The country also lacks sufficient world-class hospitality infrastructure to accommodate international tourists, with only two five-star hotels available in the country, namely Djibouti Palace Kempinski and Sheraton. Due to the government’s drive to achieve economic diversification through developing its tourism industry, Djibouti offers investment and business opportunities for overseas companies to forge closer partnerships in the hospitality sector, particularly investment in hotels and retail infrastructure, and hotel management professional services. Indeed, Djibouti is brimming with possibilities for trade and investments.