Rewards outweigh the risks in Africa

Source:
Business Times

Rewards outweigh the risks in Africa

by Lerato Mbele, 2015-01-18 11:32:39.0

‘AFRICA Rising” is the sexy catchphrase used to describe the economic growth and positive social developments on the continent in the past decade. When it came into use, we were excited: Africa was on the cusp of international greatness and, for the first time, was recognised as a place of innovation, creativity and sophistication.

“Africa Rising” is still real, but in 2014 the continent was at the centre of some of the year’s most challenging stories. Have these drained the positive energy and good will towards the continent?

In an interview on Africa Business Report, Christine Lagarde, the managing director of the IMF, spoke about an “Africa Watching”, referencing the millions of Africans who are young, poor and jobless, their lives unchanged by this era of economic growth and prosperity.

As leaders discuss ways of taking the continent forward, the focus is on addressing these inequalities.

The dominant themes for 2015 will be the issues of inclusive growth and youth unemployment.

Another focus is on growth. Although Africa has recorded GDP growth rates that average 5%, experts believe that economic output needs to be in double digits if people’s lives are to change. Which African leaders will be bold enough to pursue aggressive economic reforms that will lift growth above 10%?

Many nations will continue to leverage their natural resources. If the oil price recovers in 2015, it may be a good strategy. But the countries that invest in education, infrastructure and innovation – such as Ethiopia, Rwanda, Kenya and Mozambique — are the ones that seem to have fared better.

There are the good-news stories, such as the fabrication laboratories – small workshops, furnished with the latest computer-controlled equipment, which offer budding entrepreneurs a place to turn their ideas into tangible products. Namibia’s “fab labs” are now the biggest in Africa.

In South Africa, it is hoped that a government drive for clean energy could be a solution to power shortages.

Business executives interviewed on Africa Business Report say their biggest concerns are dealing with regulators, contract law, electricity supply and poor skills. Despite the difficulties, investors still come to Africa, focused less on the risks and more on the rewards.

Dr Carlos Lopes, the UN’s top diplomat in Africa, says the continent offers an average 9% return on investment, which is more than other emerging markets. As a result, more foreign direct investment is reaching the continent: 5.7% of the global pool, and this figure is expected to rise.

Two important elections will be held early this year, with the first in Zambia this month for a new president. Some think the vote is a mere formality, but power brokers in the ruling Patriotic Front have made it an increasingly interesting election, with plenty of infighting and factionalism as politicians position themselves for the top job.

The victor will determine whether more populist policies will be pursued, or whether free-market fundamentals will be restored.

Zambia is Africa’s largest exporter of copper, and if a changing of the guard leads to the sector opening up, the commodity could become more accessible worldwide.

Another significant poll will be in Nigeria. The country — an Opec member and officially the largest economy in Africa — ended 2014 on shaky ground because of the free fall in the oil price. Its currency weakened, which led to its foreign exchange reserves being depleted.

Then there is the major insurgency in northern Nigeria orchestrated by Boko Haram. Failure to tackle the situation has had a negative effect on Nigeria’s image.

This election will be used as a barometer to gauge public sentiment. It will also be a way to check whether the presidential hopefuls have come up with creative solutions to Nigeria’s social malaise. Nonetheless, business continues to flow into Lagos, because the country’s large population makes it an attractive market. Even with the financial stress, analysts say Nigeria will grow at 5.5% next year.

This year is the deadline for achieving Millennium Development Goals, the targets set by the UN to eradicate or halve social problems such as poverty, child mortality, gender inequality and disease. It’s said that African countries have achieved a lot in areas such as sanitation and childcare, but healthcare remains a problem.

The death of nearly 9 000 Africans from Ebola has highlighted the shortage of doctors, hospitals, medicine and research in Africa — despite nearly a decade of solid economic growth. The UN Economic Commission for Africa estimates that Ebola may have cost the continent 1% of its GDP. However, the disease has inspired billionaires such as Aliko Dangote, Patrice Motsepe, Strive Masiyiwa and others to donate more than $20-million to the medical efforts in affected countries. It’s a sign of a new philanthropic consciousness developing among Africa’s elite.

The new year certainly promises to be eventful. China and the US will continue to use diplomacy to lobby for greater shares of the new African market. Development banks will go further than ordinary banks in financing infrastructure projects. Young Africans will be finding their own voices on social issues, and politicians will either lead with empathy or argue about issues that are often detached from what citizens really want. Here’s to the kaleidoscope of life in Africa for another year.

Mbele is the presenter of “Africa Business Report” on BBC World News, Fridays at 9.40pm
@BBCLerato

This article was first published in Sunday Times: Business Times

Picture: THINKSTOCK

Picture: THINKSTOCK

‘AFRICA Rising” is the sexy catchphrase used to describe the economic growth and positive social developments on the continent in the past decade. When it came into use, we were excited: Africa was on the cusp of international greatness and, for the first time, was recognised as a place of innovation, creativity and sophistication.

“Africa Rising” is still real, but in 2014 the continent was at the centre of some of the year’s most challenging stories. Have these drained the positive energy and good will towards the continent?

In an interview on Africa Business Report, Christine Lagarde, the managing director of the IMF, spoke about an “Africa Watching”, referencing the millions of Africans who are young, poor and jobless, their lives unchanged by this era of economic growth and prosperity.

As leaders discuss ways of taking the continent forward, the focus is on addressing these inequalities.

The dominant themes for 2015 will be the issues of inclusive growth and youth unemployment.

Another focus is on growth. Although Africa has recorded GDP growth rates that average 5%, experts believe that economic output needs to be in double digits if people’s lives are to change. Which African leaders will be bold enough to pursue aggressive economic reforms that will lift growth above 10%?

Many nations will continue to leverage their natural resources. If the oil price recovers in 2015, it may be a good strategy. But the countries that invest in education, infrastructure and innovation – such as Ethiopia, Rwanda, Kenya and Mozambique — are the ones that seem to have fared better.

There are the good-news stories, such as the fabrication laboratories – small workshops, furnished with the latest computer-controlled equipment, which offer budding entrepreneurs a place to turn their ideas into tangible products. Namibia’s “fab labs” are now the biggest in Africa.

In South Africa, it is hoped that a government drive for clean energy could be a solution to power shortages.

Business executives interviewed on Africa Business Report say their biggest concerns are dealing with regulators, contract law, electricity supply and poor skills. Despite the difficulties, investors still come to Africa, focused less on the risks and more on the rewards.

Dr Carlos Lopes, the UN’s top diplomat in Africa, says the continent offers an average 9% return on investment, which is more than other emerging markets. As a result, more foreign direct investment is reaching the continent: 5.7% of the global pool, and this figure is expected to rise.

Two important elections will be held early this year, with the first in Zambia this month for a new president. Some think the vote is a mere formality, but power brokers in the ruling Patriotic Front have made it an increasingly interesting election, with plenty of infighting and factionalism as politicians position themselves for the top job.

The victor will determine whether more populist policies will be pursued, or whether free-market fundamentals will be restored.

Zambia is Africa’s largest exporter of copper, and if a changing of the guard leads to the sector opening up, the commodity could become more accessible worldwide.

Another significant poll will be in Nigeria. The country — an Opec member and officially the largest economy in Africa — ended 2014 on shaky ground because of the free fall in the oil price. Its currency weakened, which led to its foreign exchange reserves being depleted.

Then there is the major insurgency in northern Nigeria orchestrated by Boko Haram. Failure to tackle the situation has had a negative effect on Nigeria’s image.

This election will be used as a barometer to gauge public sentiment. It will also be a way to check whether the presidential hopefuls have come up with creative solutions to Nigeria’s social malaise. Nonetheless, business continues to flow into Lagos, because the country’s large population makes it an attractive market. Even with the financial stress, analysts say Nigeria will grow at 5.5% next year.

This year is the deadline for achieving Millennium Development Goals, the targets set by the UN to eradicate or halve social problems such as poverty, child mortality, gender inequality and disease. It’s said that African countries have achieved a lot in areas such as sanitation and childcare, but healthcare remains a problem.

The death of nearly 9 000 Africans from Ebola has highlighted the shortage of doctors, hospitals, medicine and research in Africa — despite nearly a decade of solid economic growth. The UN Economic Commission for Africa estimates that Ebola may have cost the continent 1% of its GDP. However, the disease has inspired billionaires such as Aliko Dangote, Patrice Motsepe, Strive Masiyiwa and others to donate more than $20-million to the medical efforts in affected countries. It’s a sign of a new philanthropic consciousness developing among Africa’s elite.

The new year certainly promises to be eventful. China and the US will continue to use diplomacy to lobby for greater shares of the new African market. Development banks will go further than ordinary banks in financing infrastructure projects. Young Africans will be finding their own voices on social issues, and politicians will either lead with empathy or argue about issues that are often detached from what citizens really want. Here’s to the kaleidoscope of life in Africa for another year.

Mbele is the presenter of “Africa Business Report” on BBC World News, Fridays at 9.40pm
@BBCLerato

This article was first published in Sunday Times: Business Times

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