Following on our recently published article titled, “The AfCFTA opportunity for Zimbabwe” where we contend that agriculture is a strategic area for Zimbabwe in as far as food production is concerned, we also highlight that one of the objectives of the AfCFTA pact is to promote industrial development through diversification.
An important area has to do with services. While the level of trade in services remains low in Africa, the service sector in Africa is very important given that it can account for over 50% of GDP in many countries. Categories include business services (including professional and ICT services) as well as communication services (including audio-visual services).
As illustrated in the info-graph, the services sector represents at least 50% of GDP in many African countries (average 53.2% in Sub-Saharan Africa), and more than 70% in some economies such as Seychelles, Sao Tome and Principe and Djibouti.
The World Bank Group notes that in Africa, while agriculture’s share of GDP has declined and manufacturing has stagnated, services are increasing as a share of total employment and GDP, driving value addition and providing critical inputs to boost other economic activities.
By comparison with other countries, the value of global services exports of Egypt (Africa’s largest exporter of services) is still insignificant when compared with the value of trade in services by leading developed and developing countries.
This means there is huge scope for intra-African trade in services.
Recent reports have cited that ZimTrade has been pushing for ICT exports in Zimbabwe.
According to ZimTrade, firms operating in the ICT sector should aggressively take advantage of government’s push to bring most of its operations online.
There has indeed been a boom in the region for online solutions that will allow pupils to learn remotely and the number of schools in countries like Zambia, Malawi and Mozambique alone could provide a huge market for Zimbabwean software and programme developers.
Some low-hanging fruits that have been identified are in the ICT-enabled services that are delivered directly over ICT networks. Other areas include trade and retail services such as e-commerce solutions, supply chain solutions, help desks and call centres.
This demonstrates that there is a massive opportunity for agile players in the sector. ICT dynamics are also supportive given that broadband connections in Africa are expected to reach 1.07 billion by 2022 while smartphone market penetration is envisaged to reach 636 million by 2035 (African Union).
All in all, investors on our market can play this theme through Cassava Smartech Zimbabwe Limited.
The company has been developing strategic lines of businesses that have the potential to generate additional value for investors in the long term.
We also maintain that technology and innovation remain the group’s major investment thesis.
We rate the stock LONG-TERM BUY.
Batanai Matsika is the Head of Research at Morgan & Co, and Founder of piggybankadvisor.com. He can be reached on +263 78 358 4745 or batanai@morganzim.com / batanai@piggybankadvisor.com
