Reports of Africa’s economic demise have been greatly exaggerated. Yes, small pockets of insecurity exist and raise popular fears in the media, but the continent’s economy has never been more stable, diversified, linked, open, resilient and welcoming than it is now, at regional, national and local levels.
Investors seek safe havens for their money to grow, said Bronwyn Nielsen, Senior Anchor and Executive Director, CNBC Africa, South Africa, but en route to business pages, they read news about Ebola outbreaks, violent elections, Boko Haram terrorists and Al-Shabaab militants. Yet painting an entire continent with a single brush of instability doesn’t appear to deter foreign direct investment.
"Foreign direct investment is full steam ahead. There may be pockets of insecurity – external influences, border incursions – but the thing is to build the agriculture sector, for that is the root cause of growth and stability. As we continue to get value for crops, invest in local processing, create jobs locally, we strike at the heart of the cause of the issue," said John G. Coumantaros, Chairman, Flour Mills of Nigeria, Nigeria.
“Once you’re in Africa, you’re in it; you don’t withdraw,” said Sunil Bharti Mittal, Founder and Chairman, Bharti Enterprises, India. Mittal is investing more than $1 billion in 17 countries on the continent. “Upticks of threats in the media are scary, but the reality on the ground is not the same.”
Nor are plunging prices in oil and metals chasing off investors as they once had. Yes, growth is slower. But no nation is facing recession, as had happened in past commodity busts. Why not? Because economies have, wisely and deliberately, diversified, said Oscar Onyema, Chief Executive Officer, Nigerian Stock Exchange (NSE), Nigeria; Global Agenda Council on the Future of Financing & Capital. Crude oil today accounts for a smaller portion of Nigeria’s GDP, offset by the fast-growing entertainment, agriculture, telecommunications and financial sectors.
Coumantaros noted: "By 2050, Nigeria will be as big as the US. Salt, sugar, rice, palm oil, cassava, they're all strong. You wish to import things? You must start to grow it and process it locally. We can't focus on cities and leave the rest of the country behind.”
Diversified economies are also becoming more resilient to shocks as they seek to ease off foreign aid. In 2013 European donors temporarily suspended overseas assistance to Rwanda. The silver lining was that it forced the country to build capacity, seek more reliable revenue, and reduce its exposure to and dependency on bilateral and multilateral programmes. “We began transitioning from development aid to investment aid, concentrating on what attracts aid and people to do business in or with Rwanda in the first place, said Paul Kagame, President of the Republic of Rwanda.
Africa’s economies are also more integrated both within and between nations. Regional free-trade associations are playing a strong role in levelling and lowering barriers to entry, equitably distributing the flow of goods and services. Due to non-tariff barriers, it used to take 22 days to move a container from Mombasa to Kigali. Cross-border discussions identified and resolved issues, and today it takes six days. That provides a classic example of “collective leadership” that responds to political crises, said Jacob G. Zuma, President of South Africa, adding that the challenge is to overcome the colonial legacy where countries did not connect with each other as they do now. “We recognize that African problems demand African solutions.”
All parties strongly agreed that government must invest in infrastructure as a top priority, as doing so would yield immense social, economic and security dividends. On a related note, governments should encourage the free flow of people across borders, showing political will to ease visa restrictions that will ensure broad labour pools. Finally, countries are increasingly in a position where they can demand conditions – such as local processing and manufacturing – on investors, rather than simply allow exports from rural areas to cities, or extraction from the continent to overseas industries. Forging these linkages will ensure broader equity, and fuel growth even further.
Leave a Reply
You must be logged in to post a comment.