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Addressing Economic Challenges in Africa Through Deep Investments

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The African continent comprises a diverse collection of countries, each with its own set of challenges. The governance of individual territories, regions, and countries requires tremendous care and attention, particularly where peace and stability are concerned. Leadership is central to the prosperity of the African continent, particularly economic development. If the authorities are perceived as legitimate, peace and prosperity have a better chance of succeeding. The political culture and climate of the African continent is an important barometer of where Africa will be as an emerging force in the global economy.

Currently, Africa’s 54 nations comprise approximately 25% of the countries making up the United Nations. The interaction of regional and national governance is sacrosanct. Over the years, Africa has undergone periods of violent change, from precolonial to postcolonial, and modern-day leadership. Given that European cartographers drew the boundaries of many African nations, the ties between people and their leaders are often fraught with difficulties. Over the years, African governments have redrawn their boundaries to better reflect cultural, political, and social nuances.

Over time, the conflict-ridden areas throughout Africa have eased. Multiple peace initiatives have supplanted growing conflict, and fomented a new cultural consciousness that espouses growth and development over war and conflict. While conflict still exists across many parts of Africa, the overall climate has cooled significantly from the days of rebellion and genocide. War-torn zones still exist, and development in these areas is riddled with challenges, extreme poverty, and hopelessness.

Conflict and governance are interlinked across Africa. Corruption is a widespread problem, particularly in the Central African Republic, Somalia, and South Sudan. Post-Cold War, major changes began to shape the political and social landscape across Africa. The liberalization of the USSR led to the development of civil society across Africa. Consider the Freedom House report from 1988 (17/50 countries were free or partly free) compared to the report from 2015 (31/54 countries were free or partly free).

Massive and Unprecedented Urbanization across Africa

Governance is also impacted by external forces. Global political movements, particularly the rise of India, China, Russia, and Arab states have impacted African society in many ways. These external actors necessitate economic environments which are conducive to peace and stability. The increasing urbanization of African society is yet another driver of success. The shift from rural to urban development is unprecedented. A report titled ‘Urbanization and Migration in Africa’ found a total of 53% of African emigrants living within Africa as a percentage of the total emigrants population

The migration between people is one of the most notable trends taking place across Africa. In 2017, intra-African migration was strongest in countries like South Africa, Ethiopia, Côte d’Ivoire, Uganda, Nigeria, and Kenya. Factors leading to mass migration include underdevelopment and development. Nigeria currently tops the list of countries in Africa with remittance receipts at approximately $22.3 billion (2018), followed by Egypt at $18.1 billion, Morocco at $7.1 billion, and Senegal at $2.3 billion. The rate of urbanization in sub-Saharan Africa was measured at 37.9% in 2015 and is expected to grow towards 54.8% by 2050. The figure is even greater for the continent as a whole at 40.4% in 2015, and 55.9% by 2050.

Tapping into Africa’s Rich Natural Resources

Africa is a hive of activity with respect to natural resources. South Africa is home to vast supplies of gold and coal, while countries like Angola are rich with diamonds, oil and natural gas. North African countries are the chief suppliers of crude oil, including Algeria, Cameroon, Chad, Egypt, Eritrea, Libya, Tunisia, Sudan and South Sedan. Central African countries like the Democratic Republic of the Congo, the Central African Republic, Botswana, and Angola lay claim to massive diamond supplies, cobalt, and petroleum resources. The issues of extracting these natural resources and marketing them to the world at large hinge upon the effectiveness of transportation networks, infrastructure development, and telecommunications facilities. Many African leaders are investing heavily in these areas, fast-tracking Africa’s learning curve to meet the requirements of major world players like China, the United States, and the European Union.

Spotlight on Angola: An African Giant in The Wings

Angola has substantial resources of liquefied natural gas and oil. It also boasts tremendous economic potential, given its hydropower facilities, agricultural growth and development, fisheries, gold production, iron production, and diamond production. The country also lays claim to significant international financial support a.k.a. FDI. Of course, its reliance on commodities like crude oil means that the country’s revenues are subject to extreme volatility. Among the many other challenges faced by Angola are its rising unemployment rate and social inequalities. The country, like many other African nations lacks a world-class infrastructure, and it has a fragile banking sector.

Leaders like Isabel Dos Santos, chair of Unitel, and other major companies like ZAP, Candando, Sodiba, and Efacac are convinced that the pathway to success is the result of a multi-faceted approach. Education and skills training, rural development, the provision of basic resources, access to financing, eradication of malaria and waterborne diseases, hospitals and paediatric clinics, and combating gender stereotypes are central to the success of Angola. For her part, Isabel Dos Santos has invested heavily in gender equality initiatives, such as promoting women from within the ranks, empowering local communities of women to take charge of their own economic destiny, and fostering a climate where female academic and economic development is encouraged and supported.

Angola’s GDP rate is expected to turn the corner by the end of 2019 and reach 1% growth, following three years of negative growth rates. The inflation rate has declined from 30.4% on average in 2016 to 15.9% forecast for 2019. Public debt in Angola has also declined from 71.9% in 2016 to a forecast total of 69.9% for 2019. And yet, despite these dramatic strides, Angola still battles the demons of volatile prices for commodities. The country generates approximately 90% of its revenues through crude oil exports, but its strongest resources have yet to be tapped – its people. By investing in the youth, women and men through literacy initiatives, educational development, and vocational training, business leaders like Isabel Dos Santos are confident that the economy will turn the corner for the better.

The World Bank report on Angola states that the new administration in the country is supportive of reforms geared towards macroeconomic stability. This is all conducive to economic growth and prosperity. The IMF has offered additional assistance to the country through its Extended Financial Facility (EFF) valued at $3.8 billion. While oil accounts for 33% of GDP and 90% of Angolan exports, there are factors limiting economic expansion in the current year. These include a production limit set by OPEC, and low oil prices globally. The central bank of Angola has adopted a monetary tightening policy to hedge against inflationary pressures, and this is already starting to pay dividends with reduced year-on-year inflation figures reported in January 2019. The World Bank group has committed $1.05 billion towards 9 investment projects across Angola.

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Africa

Ethiopia and Russia Need to Catch Up

Kester Kenn Klomegah

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“There is a need to catch up. We agreed to hold meetings regularly,” Foreign Minister Sergey Lavrov said at a media conference after diplomatic talks with his counterpart, Gedu Andargachew in Moscow. According to official reports, Lavrov and Andargachew held wide-ranging talks that were constructive and substantive, and focused on broadening cooperation between Russia and Ethiopia.

Ethiopia is one of Russia’s main partners in Africa. Both countries are tied by years of solidarity with the African countries in their fight for independence and decolonization. The creation of the African Union headquartered in the capital of Ethiopia, Addis Ababa, was the culmination of the decolonization processes in Africa.

Throughout their partnership, they have gained extensive experience in mutually beneficial cooperation that meets the interests of both countries in various areas. As a result, Lavrov said they both agreed to stimulate the work of the joint economic commission and to encourage it to implement joint investment projects across a variety of fields, including energy, such as hydrocarbon energy, hydroelectric energy and nuclear energy.

They further noted the importance and interest of companies such as Rosatom, Inter RAO, GPB Global Resources, Russian Railways, KAMAZ and UAZ in working in Ethiopia.

There is a potential for cooperation between Russia and Ethiopia in science and education. Russia pledged to support biological research under the Joint Russian-Ethiopian Biological Expedition, which has been operating there for more 30 years.

Many Ethiopian students study at Russian universities, including civilian universities and those operated by the Defence Ministry and the Interior Ministry. Russia will expand this practice. And at the request from the Ethiopian government, Moscow will conduct two specialized courses for Ethiopian diplomats at the Foreign Ministry’s Diplomatic Academy next year.

With regard to other promising areas of interaction, which has a rich history, include military-technical and military cooperation. Ethiopian Minister of National Defence, Aisha Mussa, took part in the talks as part of the delegation. Discussions here was about agreeing on additional regulatory documents which will allow more effectively to promote cooperation in supplying military equipment and in other areas.

Lavrov and Andargachew exchanged views on regional and global questions. “We are on the same page on most issues, consistently advocate for strengthening fair and democratic principles of international relations, and searching for collective answers to large-scale challenges and threats, and respecting the right of each nation to independently determine its future,” top Russian diplomat said.

With regard to the African countries and the African continent, Lavrov and Andargachew strongly support the idea that Africans should have the decisive role in deciding on the paths to resolve African problems. There is no alternative to resolving these crises, or crises in any other part of the world, through peaceful political means, while relying on an inclusive national dialogue. The situation in Africa and the goals that need to be vigorously addressed in order to overcome several crises and conflicts, primarily, on the Horn of Africa, South Sudan and Somalia. 

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Africans Must Focus on What Unites Them Not What Separates Them

MD Staff

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The majority of South Africans are appalled at the attacks on African migrants and refugees in the country by South Africans, said its Finance Minister Tito Mboweni at the opening plenary of the World Economic Forum on Africa.

“We welcome all Africans who have come to this conference; we welcome all Africans who live in South Africa. We are all Africans. We need to tell our people that what they are doing is wrong. These artificial barriers we have created and the hatred among ourselves must really become a thing of the past,” he said.

Responding to a question about the African Continental Free Trade Area, Mboweni said if Africa wants the free movement of goods, it also needs to ensure the free movement of people. “If free movement is supposed to happen, one cannot be in a position where you allow this person and not the other.”

Mboweni was standing in for Cyril Ramaphosa, President of South Africa, who was at Parliament to address protestors demanding action from the government on violence against women. Elsie Kanza, Head of Africa at the World Economic Forum, said that addressing systemic violence against women is a top priority for the meeting and she urged all leaders to act against the problem.

Amina Mohammed, Deputy Secretary-General of the United Nations, said leaders at all levels, not just at the political level, must “dig deep to bring back social cohesion. We need to look at what binds us and not what separates us.”

Speaking on the issue of the Fourth Industrial Revolution, Mohammed said that, while advances in technology are exciting, “the picture has shadows as well as light.”

Mohammed said technology is moving faster than the world’s ability to manage its impact and it is adding to the uncertainty of a world already unsettled by challenges such as climate change. “If governments cannot proactively manage the impacts, it will make our growth less inclusive with severe security implications.” Partnerships will be critical in addressing the challenges emerging from this new world.

Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, said the rapid pace of technology requires renewed frameworks for cooperation to be developed to deliver an inclusive and sustainable future for Africa.

“Africa cannot afford to be left behind. The Fourth Industrial Revolution can solve many of the issues that came with the first, second and third industrial revolutions. It is a catalyst for Africa to leapfrog into the 21st century,” said Schwab.

Cyril M. Ramaphosa, President of South Africa, in remarks read on his behalf by Mboweni, said Africa, along with the rest of the world, is dealing with the same question: how to harness the potential of the Fourth Industrial Revolution in pursuit of development and economic growth. “And importantly, how to ensure that, as we take this quantum leap into the future, we do not leave society’s most marginalized behind.”

“Disruptive trends and technologies are changing the way we live, the way we work and do business, and the way we govern. We must respond with agility to craft a roadmap for navigating this new environment. We must ensure that our citizens are prepared, and, if necessary, that they are shielded from any adverse consequences. Our response must be collaborative, multisectoral and inclusive,” said Ramaphosa.

Ramaphosa said South Africa is not only working with its neighbours to develop a continental strategy led by the African Telecommunications Union, but it has also established a Presidential Commission on the Fourth Industrial Revolution to position the country as a competitive global player in this new space.

Three new Forum initiatives were also announced at the plenary session: platforms dealing with youth and employment, risk resilience and e-commerce.

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Youth and Women Key to Making This Africa’s Century

MD Staff

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Africa can achieve a step change in economic growth by addressing shortfalls in governance, reducing barriers to trade and – crucially – embracing the potential of its youth and women, heads of state from across the continent told the World Economic Forum on Africa today.

“We have the wherewithal to be able to reach for higher levels of growth,” said Cyril Ramaphosa, President of South Africa. “The future is great. It looks very bright for the African continent. If there ever was a time when Africa definitely could be said to be on the rise, this is the time.”

Optimism about intra-African trade is on the rise following the creation of the African Continental Free Trade Area (AfCFTA), which includes nearly every country on the continent.

However, Botswana’s President Mokgweetsi Eric Keabetswe Masisi warned that leaders must now focus on the practicalities of easing cross-border commerce. “We need to remove all the barriers and put in the enablers to facilitate free trade, beginning in our neighbourhood,” he said.

If countries deliver on this, Ramaphosa said, AfCFTA could be “the greatest opportunity for economies on the continent to generate growth through trade.”

In a world where Europe faces shrinking workforces due to ageing and much of Asia soon will, Africa’s fast-growing population also offers a “demographic dividend” to drive future growth. Crowds of young Africans represent a huge resource to man the factories and service industries of the future, as well as a big potential market.
But that demographic dividend will only pay out if the young can find jobs – and that, in turn, will depend on skilling up the young.
“We need a rebirth of education for the 21st century,” said Amina Mohammed, Deputy Secretary-General of the United Nations.
At the same time, women must be brought into the fold to a much greater extent, requiring a root-and-branch fight against gender discrimination. This must include opening up previously restricted areas of education such as science to women, said Ethiopian President Sahlework Zewde.
“The important thing is to invest in our young people … and empower women,” said Mandulo Ambrose Dlamini, Prime Minister of Eswatini, formerly known as Swaziland. “I learnt that if you include women in leadership in your team, the level of intelligence increases.”
Hopes for Africa’s economy have been raised before. The continent enjoyed boom times prior to the financial crash of 2008, thanks to a commodities “super cycle” that saw sustained high prices for its raw materials. But prices for Africa’s minerals are well down on those heady days, while few countries have yet to escape the extractive model by managing to add value to their commodities. Now, however, there is a growing determination to achieve this, with Zimbabwe’s President Emmerson Mnangagwa and Namibia’s President Hage Geingob both calling for value to be added to their country’s minerals before they are exported.

“The problem of investors or foreigners who come to Africa is that they come on their own terms. From now on, Africa must tell investors when they come, they come on our terms,” said Geingob. “Why should my diamonds go out in raw form?”

Mnangagwa, who said he is striving to rebuild Zimbabwe’s “collapsed economy”, said it is vital to understand the needs of the private sector for investment in technology that could add value locally.

The over-arching requirement is for African countries to reassure their own populations and investors that they can offer a framework for stable growth, said Seychelles President Danny Faure. “We need to deepen the reform that we are doing to better reflect the need for Africa have what is necessary in terms of good governance, transparency, accountability and the rule of law,” he said.

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