Latest / TIPS Podcast / Powering Africa's Green Industrial Future: How Critical Minerals can Drive Regional Integration with David Mparutsa and Thobani K

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Powering Africa's Green Industrial Future: How Critical Minerals can Drive Regional Integration with David Mparutsa and Thobani K · TIPS Podcast

• 0:04
  SPEAKER_01: Welcome to the Trade and Industrial Policy Strategies official podcast, the show where we delve into the fascinating world of economics, policy research, and development.
• 0:17
  SPEAKER_01: In each episode, we bring you conversations with leading experts, policymakers, researchers, and business voices to explore the economic transformation agenda from industrial policy and regional trade integration to the green economic shifts and more.
• 0:34
  SPEAKER_01: We as a TIPS organization strive to create dialogue that supports development in many various industries.
• 0:40
  SPEAKER_01: I'm your host, Tobani Kay, a communications officer at TIPS.
• 0:45
  SPEAKER_01: Welcome to another episode of TIPS Podcast.
• 0:48
  SPEAKER_01: Today I am joined by none other than David Tigeriam Baruta from ABSA Group.
• 0:55
  SPEAKER_01: Hello, David.
• 0:56
  SPEAKER_01: How are you doing today?
• 0:57
  SPEAKER_00: Yeah, thanks, Tobani, and uh good afternoon.
• 1:00
  SPEAKER_00: I'm doing well and uh happy to be here.
• 1:03
  SPEAKER_01: All right, I'm glad you could manage to finally join us.
• 1:06
  SPEAKER_01: We had the TIPS Forum event, to which ABSA is one of the partners of the event.
• 1:12
  SPEAKER_01: You did a presentation there.
• 1:14
  SPEAKER_01: Care to give a general comment of how the event was?
• 1:17
  SPEAKER_00: Yeah, I thought you know the event was great.
• 1:20
  SPEAKER_00: I unfortunately couldn't be there in person, but I did dial into a few of the sessions, and I think it was a wonderful opportunity to bring different ideas from you know different contributors, be it from industry, be it academics, all around the theme, which was driving industrialization and using the African Continental Free Trade Agreement, you know, as a base.
• 1:43
  SPEAKER_00: So it was a great think tank.
• 1:44
  SPEAKER_00: Certainly picked up a lot of stuff that I wasn't aware of.
• 1:47
  SPEAKER_00: Yeah, and I think it's events like this that create platforms for us to understand what we need to do to drive industrialization across the continent.
• 1:57
  SPEAKER_01: Thank you for that comment.
• 1:58
  SPEAKER_01: If I may ask, what in your view was the most compelling insight from the 2025 SIES forum regarding Africa's regional industrial development agenda?
• 2:10
  SPEAKER_00: Yeah, Tobani, so, you know, I think probably the biggest takeaway for me was that, you know, Africa has got a long way to go in terms of trade and trading with itself.
• 2:22
  SPEAKER_00: I mean, there were a few stats that were quoted and that I quoted even in my paper.
• 2:26
  SPEAKER_00: Intra-Africa trade is up.
• 2:28
  SPEAKER_00: I think it's up 12.4% year on year to about 220 billion.
• 2:33
  SPEAKER_00: And, you know, how we measure that is the total absolute value of imports and exports within Africa.
• 2:39
  SPEAKER_00: So that figure is up.
• 2:40
  SPEAKER_00: But that said, I think there's still a significant amount of spatial concentration.
• 2:45
  SPEAKER_00: So a lot of the trading, I think over 30% of the trading is taking place within Southern Africa and predominantly South Africa trading with its neighboring states.
• 2:57
  SPEAKER_00: So still very much skewed towards trading within the Southern Africa region.
• 3:02
  SPEAKER_00: And I think the total volume of intra-Africa trade versus trade with global counterparts is just 14%, right?
• 3:11
  SPEAKER_00: So we're definitely still trading more with the East and with the West than we are with ourselves.
• 3:17
  SPEAKER_00: And another stat that I liked and that I picked up was we've got low trade volumes in terms of intermediate goods.
• 3:24
  SPEAKER_00: Now, intermediate goods basically measure your level of integration into manufacturing value chains.
• 3:31
  SPEAKER_00: And 77% of all intermediate goods traded in Africa are exported and are exported either as raw materials or as semi-processed materials.
• 3:43
  SPEAKER_00: So that shows that we're definitely feeding more global supply chains than we're feeding our own supply chains.
• 3:49
  SPEAKER_00: And even in that, we're definitely feeding more unprocessed raw materials than processed goods.
• 3:55
  SPEAKER_00: So albeit that the number is up 12.4% up year on year, there is still a long way to go to drive intra-Africa trade to the levels where it needs to be.
• 4:05
  SPEAKER_01: So you spoke about the paper that you said you wrote.
• 4:09
  SPEAKER_01: Care to give us just a brief in terms of what it's about exactly.
• 4:13
  SPEAKER_00: Yeah.
• 4:14
  SPEAKER_00: The paper was looking at how we could develop what I call the hub and spoke model for critical mineral benefication across, you know, Southern Africa.
• 4:25
  SPEAKER_00: So we looked at Africa as a whole, but you know, decided to focus on Southern Africa and the 16 member states within Southern Africa.
• 4:34
  SPEAKER_00: We decided to focus on critical minerals as well, because critical minerals is obviously a big buzzword if you just look at the global energy transition that needs to take place.
• 4:43
  SPEAKER_00: And Southern Africa is actually very well endowed with a lot of these critical minerals, be it copper, be it cobalt, be it, you know, lithium.
• 4:52
  SPEAKER_00: So the paper was really exploring how we can take these minerals and develop regional industrial value chains on the back of the minerals that we have.
• 5:04
  SPEAKER_00: So I introduced a concept of what we call the hub and spoke model, where you've got anchor hubs.
• 5:10
  SPEAKER_00: So you've got a country which is an anchor hub, you've got support hubs, and you've got specialized nodes.
• 5:15
  SPEAKER_00: So an anchor hub, to give you an example, would be a country that has got the capability of driving large-scale, high-value manufacturing.
• 5:25
  SPEAKER_00: South Africa is a good example of this.
• 5:27
  SPEAKER_00: You know, if you look at the automotive sector in South Africa, there's already a lot of skills and technology around the automotive sector and numerous auto assembly plants across the country.
• 5:38
  SPEAKER_00: So South Africa could be used as an anchor hub.
• 5:40
  SPEAKER_00: I then introduced the concept of support hubs as well.
• 5:43
  SPEAKER_00: So support hubs could be countries that feed anchor hubs either from an energy point of view, potentially from a logistics point of view.
• 5:51
  SPEAKER_00: So we looked at a country like Mozambique, for instance.
• 5:55
  SPEAKER_00: You know, Mozambique has got a significant amount of gas reserves.
• 5:59
  SPEAKER_00: You know, those gas reserves could be used to provide energy to the region, which would be a cheaper form of energy and a cleaner form of energy.
• 6:10
  SPEAKER_00: So Mozambique could be a support hub.
• 6:12
  SPEAKER_00: We could have different logistics hubs.
• 6:14
  SPEAKER_00: So you've got Tanzania out in East Africa.
• 6:16
  SPEAKER_00: And if goods need to come in and out of the eastern part of the world, then you could use Tanzania, the port of Dar Salaam, as a potential logistics hub.
• 6:26
  SPEAKER_00: And then on the west coast of Africa, you've got Namibia.
• 6:29
  SPEAKER_00: So you could use Namibia as a logistics hub for goods that need to go to the western part of the globe.
• 6:36
  SPEAKER_00: The last concept then I was introducing was then the concept of specialized nodes.
• 6:42
  SPEAKER_00: And specialized nodes would then really be a country which would then be involved in high-tech manufacturing, research and development, as well as any technical innovation, right?
• 6:53
  SPEAKER_00: So that could be anybody.
• 6:54
  SPEAKER_00: Botswana could put up its hand, you know, it's got high levels of education.
• 6:58
  SPEAKER_00: Namibia could say we're going to manufacture a specific component part that is going to go into battery manufacturing.
• 7:06
  SPEAKER_00: So it was really about looking at the region and getting different countries to perform different roles based on their competitive advantage.
• 7:15
  SPEAKER_00: So that's what I was really introducing in the paper.
• 7:17
  SPEAKER_01: Just as a precursor to my next question, David, I was reading a guide for governments, which was published by the Intergovernmental Forum on Mining, Minerals, Metals, and Sustainable Development, right?
• 7:32
  SPEAKER_01: It equips governments with practical frameworks to assess which minerals should be designated as critical based on strategic needs rather than fixed lists.
• 7:43
  SPEAKER_01: So just for the average list now, may I ask you what makes minerals to be critical?
• 7:49
  SPEAKER_00: Yeah, that's a great question, Tobani.
• 7:51
  SPEAKER_00: And you can answer it in two ways, right?
• 7:54
  SPEAKER_00: I think there is a global definition of critical minerals, and I don't know if it's a global definition, but I've certainly seen how specific countries, be it the US or China, defining critical minerals, which are minerals that would be involved in the green energy transition, right?
• 8:13
  SPEAKER_00: So it could be the likes of copper, which will be involved in electrification.
• 8:18
  SPEAKER_00: Any electrification project copper will be there.
• 8:21
  SPEAKER_00: A lot of what we're terming battery minerals, so minerals that are required to have batteries that can store energy for a longer period of time.
• 8:30
  SPEAKER_00: So it's your graphites, it's your lithiums that would be responsible for driving efficiency in batteries.
• 8:37
  SPEAKER_00: And all of this is kind of maybe it's feeding electric vehicles, it could be feeding solar energy, as simple as that.
• 8:45
  SPEAKER_00: Lots of people in Africa still don't have access to electricity, and solar is possibly the better and cheaper way of solving for this energy poverty.
• 8:54
  SPEAKER_00: So all the minerals that are involved in this value chain is what we defined as critical at a global level.
• 9:00
  SPEAKER_00: Let me call it that.
• 9:01
  SPEAKER_00: Funny enough, I was at the mining in Daba earlier this year, and you know, the minister of minerals had a very interesting definition of what he defines critical.
• 9:11
  SPEAKER_00: And he said if there's a mineral in any country which is contributing X amount to your GDP, it's contributing X amount to your employment, to your foreign currency earnings, to royalties collected, then by default, in his view, that should be defined as a critical mineral.
• 9:33
  SPEAKER_00: So he made the example of coal, for instance, being defined as a critical mineral in South Africa because of the contribution to GDP and employment and its importance in the industrialization of South Africa.
• 9:50
  SPEAKER_00: So that was a very interesting, very interesting and controversial, you know, um, you know, statement.
• 9:56
  SPEAKER_00: But yeah, I mean, I suppose there's a global definition of looking at it.
• 9:59
  SPEAKER_00: There's a green energy definition of looking at it, but I think there's a much more localized definition of looking at it, which the minister kind of alluded to during the endeavor.
• 10:08
  SPEAKER_01: Yeah, it sounds like he was looking at what really works for the economy here rather than taking a global definition of perspective, what we're saying.
• 10:19
  SPEAKER_01: All right, so my question is: critical minerals are often cited as Africa's strategic advantage in the global energy transition.
• 10:27
  SPEAKER_01: How can the continent shift from being a source of raw materials to a globally competitive processing and manufacturing hub, especially in a way that includes local enterprises?
• 10:41
  SPEAKER_00: Yeah, so it's you know, well-known fact, well-stated fact 30% of the world's critical minerals are available in Africa.
• 10:49
  SPEAKER_00: At the moment, a significant amount of those minerals are exported as raw materials or as unprocessed ore, if I can call it that.
• 10:58
  SPEAKER_00: I think we need to approach this, is there has to be a specific amount of infrastructure that needs to be developed, obviously, for you to go from exporting raw materials or raw minerals to beneficating them and to processing them.
• 11:15
  SPEAKER_00: So infrastructure is key.
• 11:17
  SPEAKER_00: When I talk about infrastructure, energy infrastructure, key.
• 11:21
  SPEAKER_00: So if you're going to have copper, which needs to be refined, if it's aluminium, you need significant amounts of energy to be able to do that.
• 11:31
  SPEAKER_00: Linked to that is logistics infrastructure.
• 11:35
  SPEAKER_00: So road and rail infrastructure.
• 11:38
  SPEAKER_00: And even in my paper, I quoted, you know, a few facts.
• 11:41
  SPEAKER_00: I think they said Africa has got one of the lowest road densities globally.
• 11:47
  SPEAKER_00: I think 2.5% of our roads are in tar form.
• 11:52
  SPEAKER_00: So the significant part of our roads are not tarred, right?
• 11:56
  SPEAKER_00: So how do you connect these minerals from where they are to where they need to be beneficated or where there needs to be value at?
• 12:03
  SPEAKER_00: So road and rail infrastructure, you know, become key.
• 12:06
  SPEAKER_00: Ports are also a critical thing, right?
• 12:09
  SPEAKER_00: Because you need to be able to process your minerals, you need to be able to bring inputs from the rest of the world, process the minerals, and then you need to be able to export, you know, process goods.
• 12:19
  SPEAKER_00: So ports efficiencies becomes critical.
• 12:22
  SPEAKER_00: And, you know, I have spent a bit of time traveling down the East African coast this year.
• 12:26
  SPEAKER_00: So from Tanzania, Mozambique, even into Durban.
• 12:30
  SPEAKER_00: And what you'll always see down that coastline is just ships littered or waiting to come into the harbor to offload goods or to onboard goods.
• 12:38
  SPEAKER_00: So ports efficiencies needs to be key.
• 12:41
  SPEAKER_00: So that's something that the continent needs to look at.
• 12:43
  SPEAKER_00: Outside of infrastructure, right, skills and technology, there's a significant amount of skills that's required, you know, to do this.
• 12:50
  SPEAKER_00: And the skills and technology base might not exist on the continent at the moment.
• 12:55
  SPEAKER_00: It would certainly exist somewhere, and it will be about how do you learn, how do you borrow from those that are driving benefication or value addition of critical minerals.
• 13:04
  SPEAKER_00: All of this needs to be funded by somebody.
• 13:06
  SPEAKER_00: The infrastructure needs to be funded by somebody, especially massive funding gaps around infrastructure.
• 13:12
  SPEAKER_00: And then the coordination of all these initiatives.
• 13:15
  SPEAKER_00: If I reference back to my paper, it's all about the hub and spoke model.
• 13:19
  SPEAKER_00: So if a country is responsible for extraction of critical minerals, let's say DRC for extracting of cobalt, where is that cobalt going to be processed?
• 13:29
  SPEAKER_00: So you need the infrastructure built to connect those two.
• 13:33
  SPEAKER_00: That cobalt could be processed in South Africa because South Africa has got high manufacturing capability.
• 13:39
  SPEAKER_00: You know, South Africa could get energy from Mozambique.
• 13:42
  SPEAKER_00: So all of that needs to be coordinated.
• 13:44
  SPEAKER_00: One of the biggest impediments to intra-Africa growth is industrial policy is largely driven in isolation.
• 13:52
  SPEAKER_00: So Mozambique is not looking at what Zimbabwe is doing.
• 13:55
  SPEAKER_00: Zimbabwe is not looking at what Zambia is doing.
• 13:57
  SPEAKER_00: Zambia is not looking at what Botswana is doing.
• 13:59
  SPEAKER_00: So everybody is developing industrial policies in isolation.
• 14:03
  SPEAKER_00: And the region needs to come together and understand who has got a competitive advantage to play what role within a value chain.
• 14:11
  SPEAKER_00: So I already said South Africa, manufacturing.
• 14:13
  SPEAKER_00: DRC can be a supplier of raw materials.
• 14:16
  SPEAKER_00: Mozambique could be energy and logistics.
• 14:18
  SPEAKER_00: Namibia could be something else, right?
• 14:20
  SPEAKER_00: So the coordination of all of these efforts is very, very critical, which is where a body like a SADAC needs to take front and center stage in terms of coordinating industrial policy around the critical minerals that we have to enable a greater level of benefication and value addition.
• 14:39
  SPEAKER_01: You speak to something that I thought was a great quote from actually the forum.
• 14:45
  SPEAKER_01: Well, they were saying that the African continental free trade area seems to be more of a trade policy rather than an industrial policy.
• 14:54
  SPEAKER_01: So by industrial policy, there has to be a necessity in terms of how we coordinate across the continent instead of just being, you know, isolated bodies that are actually trying to trade and work with each other.
• 15:10
  SPEAKER_01: So for my next question, supply chain finance is emerging as a key lever to integrate SMEs into broader industrial ecosystems.
• 15:19
  SPEAKER_01: I mean, SMEs and minerals is that that's your niche.
• 15:22
  SPEAKER_01: Yes.
• 15:23
  SPEAKER_01: Yes.
• 15:23
  SPEAKER_01: Okay.
• 15:24
  SPEAKER_01: How is AFSA innovating in this space to support suppliers operating within regional hubs or cross-border production system?
• 15:33
  SPEAKER_00: Yeah.
• 15:34
  SPEAKER_00: So, Tobani, supply chain financing, it's a product that's now largely available across many financial institutions, right?
• 15:43
  SPEAKER_00: What I like about our approach has really been more on our enterprise and supplier development strategy, which lives alongside our supply chain finance offering.
• 15:52
  SPEAKER_00: And this really looks at financing of suppliers, SMEs, and local businesses as well, and funding them using a non-traditional methodology.
• 16:04
  SPEAKER_00: So traditional bank lending, whenever you go for a loan, even as an individual, we would want to see, you know, your ability to repay that loan.
• 16:13
  SPEAKER_00: We would want to see whether you've got collateral in case you're not able to pay back that loan.
• 16:18
  SPEAKER_00: And, you know, we always look at the historic performance.
• 16:21
  SPEAKER_00: So how have you been managing your account, you know, historically?
• 16:24
  SPEAKER_00: So it's a rather historic view of making a credit decision and a credit decision based on collateral.
• 16:32
  SPEAKER_00: So the challenge that SMEs face is a lot of them do not have, you know, historic data, they don't keep financials, and they don't have collateral.
• 16:39
  SPEAKER_00: So that immediately excludes them from traditional bank financing.
• 16:43
  SPEAKER_00: And in thinking of our ESD approach, we then said, well, we need a different way of assessing SMEs for credit.
• 16:50
  SPEAKER_00: So we'll make a lending decision on the back of a future cash flow that you're going to receive.
• 16:55
  SPEAKER_00: So even if you're not able to look at historic, you know, financial statements, as long as you've got a guaranteed future cash flow from a contract, from a purchase order, from an invoice, then we'll make a financing decision, you know, on the back of that.
• 17:10
  SPEAKER_00: We effectively offer two products.
• 17:12
  SPEAKER_00: One is what we call a bank lending product.
• 17:14
  SPEAKER_00: So this is where we're deploying our own capital and lending into a supply chain.
• 17:19
  SPEAKER_00: And we also have a fund administration product where we administer funds on behalf of corporate entities.
• 17:26
  SPEAKER_00: In the mining sector, the Anglo-Zimela Fund, we are the administrators of that fund.
• 17:31
  SPEAKER_00: We have had a tremendous amount of success with this product across the continent.
• 17:36
  SPEAKER_00: So in South Africa, I've already mentioned, you know, Anglo-American, we are the administrators of that fund.
• 17:41
  SPEAKER_00: We have various other mining houses that we've got MOAs and MOUs with, and we are lending directly from our own capital into their supply chain, be it SME businesses or local businesses.
• 17:53
  SPEAKER_00: Across the continent, in Botswana, we've worked significantly with Bsuana.
• 17:58
  SPEAKER_00: I think since we signed an MOU with them, we financed their SME suppliers over a billion pools from inception, you know, to date.
• 18:08
  SPEAKER_00: In Zambia, we've got partners, in Tanzania, in Ghana.
• 18:12
  SPEAKER_00: So it's a product that is really speaking to the mining sector based on the fact that the mining industry has got huge procurement spends.
• 18:22
  SPEAKER_00: It's got large value chains, it's got large supply chains.
• 18:25
  SPEAKER_00: You're also seeing a lot of local content across the continent, which is, I can't say forcing, but which is driving mining companies to procure goods from SMEs and from local businesses.
• 18:38
  SPEAKER_00: On the back of that, there's a lot of local businesses that are getting access to procurement opportunities, and we are funding those businesses using a non-conventional methodology.
• 18:50
  SPEAKER_00: So that's probably from an innovation point of view, you know, the offering that APSA has that's really speaking to driving local participation in mining value chains.
• 19:01
  SPEAKER_01: So when I was anticipating you coming here, I was also just researching online and just finding things that AFSA is doing.
• 19:09
  SPEAKER_01: I saw the South African business showcase during the London investment.
• 19:14
  SPEAKER_01: And then I was wondering, are they also doing this in Africa?
• 19:18
  SPEAKER_01: And then researching again, and I'm finding things like Made in Africa Conference, the AFSA ESD Expo.
• 19:24
  SPEAKER_01: Yes.
• 19:25
  SPEAKER_01: You in charge of that?
• 19:26
  SPEAKER_00: We split the responsibilities uh across the bank.
• 19:30
  SPEAKER_00: Made in Africa is a new platform, but it's one which we are looking to see how we can support it going further.
• 19:37
  SPEAKER_00: It's effectively the largest online gathering of buyers and sellers across the continent, right?
• 19:44
  SPEAKER_00: So you've got corporate buyers and you've got SME sellers, and it's really trying to then connect those two.
• 19:50
  SPEAKER_00: So it's also part of our mandate of you know not just providing finance to SMEs, but how can you help SMEs get access to markets, which is even a greater necessity than the finance.
• 20:04
  SPEAKER_00: The financing is almost a secondary decision if you've got a marketplace, right?
• 20:09
  SPEAKER_00: So lots of interest and investment around how do we connect SMEs to marketplaces locally and across the region.
• 20:17
  SPEAKER_00: So made in Africa is one, the smart procurement one that you rightfully mentioned.
• 20:21
  SPEAKER_00: I think that's the largest gathering of buyers and sellers in South Africa.
• 20:26
  SPEAKER_00: We've been a financial sponsor of that for a while, and we do sponsor some of our SMEs to attend that in order to assist them with access to market.
• 20:35
  SPEAKER_00: Over and above that, we also do trade missions.
• 20:39
  SPEAKER_00: So in Zambia, for instance, I think last year we did a trade mission.
• 20:43
  SPEAKER_00: We take Zambian local businesses, we took them across to the DRC for them to look at potential opportunities and business opportunities.
• 20:51
  SPEAKER_00: So also really trying to help SMEs get a marketplace.
• 20:55
  SPEAKER_00: Because, like I said, that's the biggest impediment to SME growth, is they lack markets.
• 21:00
  SPEAKER_00: Once you've got a marketplace for your goods, financing decision becomes a much easier decision.
• 21:06
  SPEAKER_00: Tobani will also do a lot of thought leadership around this area.
• 21:10
  SPEAKER_00: It's the reason why we publish this paper, it's the reason why I'm having this discussion with yourselves.
• 21:16
  SPEAKER_00: I do spend quite a fair amount of time on the continent at conferences.
• 21:21
  SPEAKER_00: I was recently at the SADEC Industrialization Week, you know, talking to all 16 member states around how we can develop value chains and ecosystems and what role different people have to play.
• 21:34
  SPEAKER_00: So we're invested heavily in thought leadership, writing articles, publishing papers.
• 21:40
  SPEAKER_00: And this is really our responsibility because, you know, we've got a diverse set of clients, we see what's happening on the continent, we see where the gaps are.
• 21:48
  SPEAKER_00: So it is really our obligation to be able to close that gap through the stories we tell.
• 21:55
  SPEAKER_01: Thank you for that.
• 21:56
  SPEAKER_01: Yo, due to time.
• 21:57
  SPEAKER_01: Let me ask you one last question.
• 22:00
  SPEAKER_01: The concept of regional industrial hubs redefines how countries can cooperate based on functional complementarity rather than geographic proximity.
• 22:11
  SPEAKER_01: I think you are just touching on this.
• 22:14
  SPEAKER_01: How does this model reshape opportunities for SMEs and enterprise development across borders?
• 22:20
  SPEAKER_00: Yeah.
• 22:20
  SPEAKER_00: Tobani, so when we talk about regional industrial hubs, regional economic hub, we are now going into a certain level of specialization.
• 22:30
  SPEAKER_00: Remember the hub and spoke model that I spoke about, each country will be responsible for specific tasks and strengths within an industrial value chain, right?
• 22:42
  SPEAKER_00: It then offers SMEs the opportunity to kind of specialize in certain parts of that value chain.
• 22:51
  SPEAKER_00: So if South Africa is doing manufacturing, how can SMEs be involved in a manufacturing value chain?
• 22:57
  SPEAKER_00: Whether it's, you know, they can, you know, manufacture component parts.
• 23:02
  SPEAKER_00: So they can be tier two or tier three suppliers into this value chain.
• 23:06
  SPEAKER_00: They can be skills multipliers, you know, for instance.
• 23:09
  SPEAKER_00: So it then lends to SMEs now pivoting.
• 23:13
  SPEAKER_00: And the beauty about SMEs, they've got the ability to pivot very, very quickly.
• 23:17
  SPEAKER_00: So they pivot based on the specialization that their country is taking part in.
• 23:24
  SPEAKER_00: If you are a logistics hub, for instance, and you know, goods need to be moved from your ports into inland Africa, lots of opportunities for logistics, right?
• 23:34
  SPEAKER_00: So SMEs need to play a greater role in the logistics value chain in that particular space.
• 23:39
  SPEAKER_00: So as we specialize, as we play to our strengths, SMEs must follow the money.
• 23:44
  SPEAKER_00: I always say you must follow the money.
• 23:45
  SPEAKER_00: You must follow where industry is developing and plug yourself into those value chains.
• 23:50
  SPEAKER_00: Obviously, that needs to be supported by policy that ensures that SMEs can participate in these value chains.
• 23:58
  SPEAKER_00: So they get access to procurement opportunities, they get access to contracts.
• 24:03
  SPEAKER_00: Even before that, we develop the skills so they can participate in these value chains.
• 24:08
  SPEAKER_00: And then the last part is where we come in, the bank is to ensure that they've got the financing to be able to take part in this.
• 24:16
  SPEAKER_01: I've never thought of a bank doing all of these things.
• 24:20
  SPEAKER_01: Maybe if I may ask, from a financial architectural perspective, what are the most significant constraints limiting the formation of cross-border industrial value chains?
• 24:31
  SPEAKER_01: And how can commercial banks like ABSA help overcome these constraints?
• 24:35
  SPEAKER_00: Yeah.
• 24:35
  SPEAKER_00: We'll go back to the point on infrastructure, Tobani.
• 24:38
  SPEAKER_00: So I think the World Bank stated anything between a$68 billion to$128 billion infrastructure financing gap in Africa on an annual basis.
• 24:50
  SPEAKER_00: So that's a massive amount of capital that needs to flow to be able to drive infrastructure investment across the continent.
• 24:58
  SPEAKER_00: It's such a large number that no one bank can take up or has got the capital base to be able to close that gap.
• 25:06
  SPEAKER_00: So project financing for banks becomes very important, right?
• 25:09
  SPEAKER_00: Because a lot of these infrastructure projects require a certain degree of project financing.
• 25:15
  SPEAKER_00: Allocation or syndication of risk and syndication of debt.
• 25:19
  SPEAKER_00: So on a$200 million project or maybe a half a billion dollar project, you could have four banks syndicating to take up a percentage of the risk.
• 25:28
  SPEAKER_00: So not one bank is sitting with the entire risk.
• 25:31
  SPEAKER_00: So syndication of loans becomes very, very critical.
• 25:35
  SPEAKER_00: I think we spoke about working capital and supply chain finance solutions as well.
• 25:38
  SPEAKER_00: That helps with you know with the value chain and making sure that the value chain is working effectively.
• 25:44
  SPEAKER_00: And then also ensuring that, you know, we've got innovative solutions to finance SMEs in this space.
• 25:50
  SPEAKER_00: So really, you know, banks, it's about how do you close that infrastructure financing gap through project financing and ensuring that the value chain of those projects is fully funded.
• 26:02
  SPEAKER_00: And it's probably not just banks who fix this, there's a broader mandate for financial institutions, right?
• 26:08
  SPEAKER_00: So developmental financial institutions also have to play their role because they've got a developmental mandate.
• 26:15
  SPEAKER_00: So you could have entities like Development Bank of Southern Africa playing a critical role in terms of providing capital or de-risking projects.
• 26:24
  SPEAKER_00: So I think financial institutions, including commercial banks, have got various roles they can play, but they have to partner, they have to collaborate, they have to syndicate, and they have to ensure that the products that they're offering can serve the large projects and the value chains of those projects.
• 26:42
  SPEAKER_00: All right.
• 26:43
  SPEAKER_00: Thank you, David, for those responses.
• 26:46
  SPEAKER_00: Thanks, Tobani was great to be here.
• 26:49
  SPEAKER_00: I think it's only through platforms like this that we can share knowledge and experience, which will certainly get us to drive that industrialization agenda across our great continent.
• 27:01
  SPEAKER_01: Thank you.
• 27:02
  SPEAKER_01: And that's it for today in our TIPS podcast.
• 27:05
  SPEAKER_01: We heard David Baruta's views and suggestions on how financial institutions, in particular APSA, can play a role in intra-African trade, the need for collaboration as countries and member states of the African Continental Free Trade Area, the need for coordination of key sectors regionally, anchor hubs, energy as infrastructure.
• 27:32
  SPEAKER_01: Baruta places an emphasis on the integration of SMEs into bigger markets and the processing of our own critical minerals such as coal.
• 27:44
  SPEAKER_01: I'm your host, Tobanike.
• 27:46
  SPEAKER_01: Before I leave, please don't forget to subscribe, leave a review, and connect with us on social media.
• 27:52
  SPEAKER_01: Remember to follow our body of research and reports on the Tips website at www.tips.org.za.
• 28:01
  SPEAKER_01: Interact with this podcast on Apple, Spotify, Deezer, and YouTube.
• 28:06
  SPEAKER_01: Thank you for listening.
• 28:07
  SPEAKER_01: Goodbye.