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Opportunities Continue To Outweigh Investment In Africa

Aakash Agarwal

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“Africa is a continent with extraordinary challenges, and it’s a copout just to wait for governments to deal with them. If you see a problem, then think about how you can solve a piece of it” — Strive Masiyiwa, chairman of the pan-African company Econet Group.

Africa’s slow progress can be a cause of concern for prospective investors. However, investing in the emerging sectors will long-term benefits to those willing to wait. Strong demographics, rising sectors and abundant resources are some of the long-term growth opportunities. There are several investment opportunities for those who want to bring about a positive change in the conditions of the continent, while achieving long term yields from the same. According to RMB Investment Attractiveness Rankings, the best countries to invest in are Egypt, Morocco, and South Africa.

Agriculture

Agriculture is one of the top sectors in Africa with an immense growth potential. The sector contributes to over 15% of Africa’s GDP and has shown a good growth rate due to prior government policies that prioritise the sector to retain its sustainability and competitiveness. The top earning agricultural products are coffee, cocoa, maize and wheat with Ghana, Nigeria, South Africa, Ethiopia and Uganda as the top producers.

Large areas of arable land, increasing use of technology, massive youth dividend, increasing government support and a large demand base makes agriculture an attractive sector for investment despite the problem of erratic rainfall pattern in some places.

By the year 2050, it has been predicted that Africa’s population will almost double with a growth rate of 2.7% per annum. To meet the growing needs of the population, substantial investment from its global peers is absolutely necessary. That will also help the sector to grow and enhance its status as a global competitor, help in economic diversification and also mitigate the prominent problems of undernourishment, poverty and hunger that exist in the region.

Manufacturing

Africa possesses an abundance of raw materials which can be easily turned to manufactured products for greater reliance on local products and increased exports of the same. The top three manufacturers in Africa are South Africa, Morocco and Egypt.

The growth of manufacturing can greatly drive economic growth and development in Africa. However, the sector faces challenges like lack of skilled-workforce, infrastructure gaps including low power supply and inadequate regulatory measures to address the prominent challenges. The import to export ratio of manufactured products in Africa is very high as Africa mostly exports unprocessed commodities. The growing manufacturing sector is making great advances in this aspect. It has already increased the total export goods from 18.7% in 2012 to 35.6% in 2017 and caused a significant decrease in imports implying greater importance to domestically manufactured products.

There has also been a shift in the focus of FDI projects from dominant extractive industry to consumer-facing industries like retail, technology, media, etc. This trend is expected to continue in the near future.

Retail

The African Development Bank is expecting the current 350-million-strong middle class to grow to under one billion by 2040. The growing middle class demography is contributing to the growth and modernisation of the retail sector which is greatly devoid of supply competition and requires investment to meet the growing consumer base. The market for essential goods constitutes the majority of consumer spending owing to the low-income levels in the economy and as the income-level status is not expected to undergo a drastic change in the recent future, the comparatively smaller market for luxury products will have a low growth rate.

As a large amount of consumer spending in Africa taking place in informal markets, due to absence of prominent formal retail presence, is unaccounted for, Africa is projected as an economy with low household retail-spending despite that not being the case.

“The Brookings Institute’s latest analysis on trends of the African consumer market shows that consumer expenditure has grown at a compound annual rate of 3.9% since 2010 and reached US$1.4 trillion in 2015. This figure is expected to increase to US$2.5 trillion by 2030.”

There are several cyclical challenges related to the retail sector, like low GDP growth, high inflation, dwindling credit extension. The challenges can be used as opportunities to enhance the growth of the sector by focusing on the development of the retail infrastructure and modern logistics spaces to satiate the demand for high-quality space from retailers looking to expand in Africa.

Finance

Finance is one of the top sectors in Africa which regulates the funding of all the other sectors. Financial innovation guarantees the diversification of banking sector services and facilitates the incorporation of capital market instruments to reduce investment risk.

Rwanda, The Gambia and Senegal have shown massive progress in financial system rankings. However, there has been an overall decline in Africa’s global financial standing from 2017 – 2018 due to a fall in the pace of reform of this sector.

The impact investing industry has shown substantial growth and is quite relevant as several countries in Africa lie below the global average score for Human Development (0.8) with declining levels of official assistance. The industry has made abundant impact across a wide range of sectors like Healthcare, Agriculture, Housing, Education and others. This provides ample opportunities for investment in several initiatives which will reap both financial and environmental returns.

Some of the prominent threats to this sector include underdeveloped market infrastructure due to limited funding, difficulty in gathering viable investment to meet financial and social targets, limited capital supply, unclear regulatory environment, inconsistent impact-measures and so on. These might prove to be a disincentive to many and hinder their investments. However, a far-sighted investor might implement innovative measures to meet the pending gaps and turn these challenges into opportunities to optimise social and environmental investments.

Infrastructure

Infrastructural inadequacy causes a huge hindrance to investment and growth in all sectors of Africa. There is a wide gap between the infrastructure needs of the continent and the amount being spent on fulfilling the need. There is an urgent need to bridge the gap through sufficient investment to meet the growth needs of Africa.

In countries like East Africa, Ethiopia and Tanzania, infrastructure investments in the form of new roads, energy support, transportation networks and others have led to guaranteed growth and transformation of the prevailing sectors. Construction has been primarily responsible for high economic expansion in Egypt. Infrastructural developments lead to employment generation via contractors, boosting aggregate demand. Investment in infrastructure by foreign players can prove to be very beneficial as it would provide the required sophistication to the local industry by supplying goods needed for large projects.

Real estate has evolved significantly, providing higher returns on investments, thus, becoming increasingly attractive to potential investors. Despite having a good growth potential, real estate has certain risks attached to it like complex legal considerations, such as property ownership rights, social instability resulting from inequality, and others. However, the growth drivers like sustained high demand driven by urbanisation, improved capital regulation, technological advancements in banking leading to a boost in investment rates, and expected GDP growth supporting the demand for housing easily overshadow the challenges.

Conclusion

For many years, Africa’s growth potential has been understated and misunderstood. It has been treated as a non-friendly investment destination due to the several challenges posed. However, there has been a worldwide lack of understanding the ease of converting the insurmountable challenges to opportunities. Africa’s growing population and prevailing problem of excess demand needs to be met via increased investment and innovation which will in turn lead to increased employment, decreased poverty and increased infrastructural development. Thus, despite Africa’s slowing global growth, if the prevailing challenges are addressed adequately, growth is inevitable.

Aakash Agarwal is currently pursuing a Bachelor of Science in Economics (Honours) from Doon University, Dehradun, India. He has a research interest includes Global Economy, Financial Economics and IR Theory. His work has been published by the Diplomatist Magazine, South Asia Democratic Forum and the Kootneeti.

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Africa

Armed Bandits: The Novel Security Threat in Nigeria

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The shrinking of Lake Chad which has led to competition between farmers and herders over scarce resources coupled with Boko Haram insurgency in northeast Nigeria has rendered the Lake Chad regionwhich comprises areas bordering Nigeria, Cameroon, Chad, and Niger—one of the most volatile regions in Africa. Extreme deprivation, food insecurity, and rampant disease outbreaks have produced a humanitarian catastrophe with more than2.5 million people internally displaced in the four states with contiguous borders. And, to worsen the case, with the coronavirus pandemic, mobility has been constrained which, in turn, limits the flow of food and other basic necessities of life to refugee camps and communities within the region.

Nigeria is the epicentre of most of the security challenges in the region. A lot is known of Biafra separatism in the southeast, oil militants in the Niger Delta, street touts in the southwest, farmers and herders in the northwest, and Boko Haram (the West African Province of the Islamic State) in the northeast. However, little is known of the armed banditsvariously known as the motorcycle bandits due to their employment of motorbikes for terrorist attacks—in the northwest, particularly in states such as Niger, Katsina, Zamfara, Kaduna, Sokoto, Kogi, and Kebbi. This is partly because of the fact that the destructions and devastations perpetrated by the armed bandits are concentrated mostly in villages and rural areas than in the major urban spaces.

These lethal bandits operate out of abandoned forest reserves in the northwest and central states to abduct villagers, ransack shops, steal livestock and grains, and murder anyone who tries to flee the attacks thereby terrorising the denizens of the affected communities. In the course of the current coronavirus crisis, the bandits attacked rural dwellers who had received food from the government and other non-governmental organisations. Over 8,000 persons have lost their lives to these gory attacks. Because these attacks have been carried out in the rural areas of the concerned states, they have not gained traction in international media despite the brutalisms and devastations they have rained on myriad lives, families, and property.

The identity of the bandits are largely unknown but local sources and the police posit that they are an outgrowth of existing ethnic clashes between farmers and herders in the region which saw the rise of vigilante groupstake up arms to defend themselves. Thus, the local bandits are seemingly an admixture of criminal gangs and aggrieved Fulani herdsmen who have resorted to violence not only to shield themselves but also to profit from the lucrative trade of kidnapping for ransom which is pervasive in parts of Nigeria. In consequence of the fact that the bandits attack both farmers and herders—both groups reproach each other for instigating the attacks in a region renowned for the deep-seated animosities amongst different ethnic groups—their identity is difficult to pinpoint.

Surely, the reason for the emergence of this peculiar group lay in the governance crisis of Nigeria with the decades of corruption, mismanagement, ethnic animosity, and youth unemployment since its independence from Britain. Despite the huge oil reserves that contribute to the country’s federal revenue, Nigerian citizens have largely remained impoverished with—according to estimates from a 2018 report from the World Poverty Clock—about 86.9 million living in extreme poverty. And there are further projections from the World Bank and other international financial institutions that by the end of the current era of coronavirus pandemic—if does not become endemic—the Nigerian economy will be shattered and consequently plunged it into recession.

With the number of Nigerians living in abject poverty expected to increase to 110 by 2050, it is unlikely that Nigeria will achieve the UN sustainable development goals by 2030 not least because the Nigerian government now invests more in curbing its security conundrums than in education, health, and development. In the wake of the recent violent attacks on rural areas, the government has committed money to eradicating the bandits in the forest reserves wherefrom they carry out attacks, but this also meant that other sectors are side-lined with doctors threatening to go on strike in the middle of the coronavirus pandemic due to the malfunctional state of the health sector and the unfavourable working conditions of healthcare workers.

Perhaps the greatest anxiety about the bandits’ attacks is a potential alliance with Boko Haram another fierce insurgent group in the northeast that has wreaked havoc on communities in the north east for over a decade. In a new video, Abubakar Shekau the leader of Boko Haram invited these bandits to join them in fighting for a good cause which is establishing an Islamic State in Nigeria. As he categorically put it “We call you to join us to institute Sharia globally. When you come, we will accept you according to (Shari’ah) law, and we (will) worship Allah as He commands us.” Such admonition has the potency of rallying the armed bandits to contribute to Boko Haram’s cause of creating an Islamic state in the region—the sort of state that abolishes western education, discards any notion of gender equity, and construes Shariah law as the preponderant law that must orientate politics and public life. In the Lake Chad region which is a confluence of cultures and peoples from different walks of life, this is an affront to democracy and freedom of expression.

A further alliance between the motorcycle bandits and Boko Haram would not only be catastrophic for rural denizens in the northern parts of Nigeria but will unleash further misery to the vulnerable within the Lake Chad region who have not only been forced to flee their homes and abandoned their means of livelihood but have also lost friends, relatives, and loved ones to the gory attacks. Curtailing the potential alliance between these two ferocious terror groups must be one of Nigeria’s major priority in addition to building a strong economy and accountable democratic institutions to check on corruption and mismanagement by public officials.

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Somalia: An American Media Pundit, Exaggerates and Weaponizes International Aid

Ahmed Said

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Recently, after the Somali parliament removed prime minister, Hassan Ali Kheyre, in an overwhelmingly no-confidence vote, it didn’t only raise my eye borrows but it made me startled to read an opinion article on the matter in the Washington Examiner by Michael Rubin whose writings I usually find quite utopian and unbalanced. The piece titled, The State Department spent $1.5 billion on Somali democracy and built a dictatorship, was full of chunks of inconsistencies, bending the truth, and calumny attacks on the sovereignty of my home country, Somalia, in the disguise of having the right to express an opinion.

Before we delve into the essence of my observations of Mr. Rubin’s article, let me briefly explain why prime minister, Hassan Ali Kheyre, was ousted by the parliament. However, to safe the reader a boring monologue on why and how the prime minister was sacked, I have to go to the point with brevity; the prime minister lost his job after indirectly sabotaging a one-man, one-vote election legislation he was a part of creating it, so that the Somali citizens can directly elect their leaders, a right they lost decades ago, whose opposite is to go back to electing parliament through clan based picks by traditional elders, then the parliament elects the speaker and the president, then the president nominates a prime minister to be confirmed by the parliament, a process tainted with corruption and vote buying, coupled with dangerous foreign interests; the prime minister preferred that old process, but to say the least, the prime minister was a competent figure who did a great job for the public while he was in office, and in his resignation speech, although he did not like how the no-confidence vote was conducted, he left with dignity and a unifying message. 

The trick to hoodwink readers Mr. Rubin used in the title of his article was to combine all aid received by Somalia from all sources, even from the United Nations, as a single one of 1.5 billion given by the US State Department alone, which is not the case, and he claimed it as an example for being implicitly one-time payment. Then, he wrote:

“Consider first the sheer scale of the United States’s investment in Somalia: The U.S. has spent tens of billions of dollars on Somalia in recent decades.” But in the title of his article, he  tied together the 1.5 billion and what he called building a dictatorship in Somalia in which the reader cannot escape the inference that the US built in Somalia a president Farmaajo dictatorship with 1.5-billion-dollar aid money, a downright lie to discredit Somalia’s resolve not to cave in foreign interference in its affairs, as contrarily evidenced by the weak Somali governments prior to president Mohamed Abdullahi Farrago’s administration. On the other hand, what is so surprising if not disgusting is that Mr. Rubin wrote the following as he cites a biased website that Somali leaders embezzled, a website apparently run by Somalia’s self-proclaimed republic of Somaliland to disseminate anti-Somali news and propaganda; he wrote incoherently as he inserts links, making it an issue, for instance, the international debt relief Somalia deserved so much because of its transparence and good governance, which the international donors praised:

“Under Ambassador Donald Yamamoto, aid to Somalia more than doubled. Over the last year, not only did USAID contribute near $500 million, but Yamamoto successfully advocated debt forgiveness that forced American taxpayers to write off $1 billion in Somali debt, much of which was embezzled by some of the same figures with whom the U.S. now partners. Yamamoto wanted to give Somalia even more.”

Finally, I would say that Somali president, Mohamed Abdullahi Farmaajo, despite his government’s term coming to an end, will nominate a new prime minister, and the new prime minister will be confirmed by the parliament. Somalia will not go back to the corrupted, old system of election. Somalia will succeed and hold a one-man, one-vote election. The sovereignty of Somalia is stronger under president Farmaajo leadership, and as Somalis, we will not let our sovereignty to be compromised by foreign actors. And, Mr. Rubin, I resect your opinion no matter how distorted it can be, but I don’t think the United States government, or the international donors agree with you!

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Developments in Russia’s Humanitarian Policy in Africa

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Yevgeny Primakov, the Russian politician, and journalist has been appointed the head of Rossotrudnichestvo, an agency promoting Russia’s humanitarian policy, following a decree signed by Vladimir Putin. Primakov is the successor to Eleanora Mitrofanova, who led the department since December 2017. Future changes in humanitarian policy embodied by Rossotrudnichestvo are thought to create a more favorable regime for Russia in the world arena along with more solidarity.

In order for that to be the case, Russia’s humanitarian policy needs a fundamental review. In recent years, trends that may serve as an impetus for necessary future changes have emerged. The first innovation concerns the functioning of organizations promoting Russia’s international policy and the assessment of their performance. The second determines their regional focus.

As for the revision of the functional features of Russian institutions of humanitarian policy, the necessity to work with NGOs on the ground and use digital technologies seems crucial. Firstly, clarification of the country’s priorities in the field of humanitarian policy could turn useful. Drawing attention to modern power diffusion from state actors to non-state ones, Russian institutions may concern themselves with Russian humanitarian projects’ effectiveness and motivate Russian donors and actors to be more focused on practical work “on the ground.” A shift from only international level cooperation to cooperation on supranational and subnational levels could ensure Russia’s influence and, as a result, a more favorable treatment.

The further issue is effectiveness. With specific humanitarian projects, this means that institutions could improve the situation of the population, communities, and households — only such an effect can and should be a criterion for the effectiveness of the humanitarian policy. Along with official channels, the implementation of this mission requires a more active involvement stemming from the non-governmental sector, namely the media community, and Russian business companies conducting foreign economic activity. It is a search for common ground, universal themes, and areas of interaction in which public opinion abroad (non-governmental organizations, communities) in the future could become a decision-making center for the development of joint dialogue and mutual understanding. In conditions of high uncertainty, digital technologies could have a positive effect on more efficient work.

When it comes to reorienting the regional foreign policy of humanitarian diplomacy institutions, the African continent appears as a priority. The humanitarian policy includes the promotion of humanitarian values. Historically, Russia defends such humanitarian values as peace preservation and justice. Considering the current power transition among states (and it’s moving from West to East and stronger cooperation North-South), Russia could be perceived in international affairs as a guarantor of peace. Consequently, the second apparent humanitarian policy shift is developing more adequate approaches in several areas and regions. The most relevant policy directions for Russia are the countries of the former USSR, the Middle East, the Asia-Pacific region, Africa, and South America. The last two are considered to be resource centers as well as business hubs that if successfully overcame (concerning Africa) problems such as mass hunger and the spread of diseases, could become a field of activity for Russian companies’ interest, and contribute to the development of humanitarian initiatives. These humanitarian initiatives should not be taken as a thing-in-itself, initiatives just for existing initiatives, but rather as a useful tool, providing new employments, further education, and better life opportunities.

The change in the humanitarian agenda is visible on the example of topics within the SPIEF. The SPIEF is an annual Russian business event in the economic field, which has been held since 1997. The Forum’s key mission is to be a practical tool for business, allowing to overcome the barriers that divide Russia and other countries, both geographical and informational. If we look at the previous discussions’ development in relation to the humanitarian agenda, the movement toward the shifts has already begun. Further analysis covers humanitarian issues discussed at the St. Petersburg International Economic Forum 2017-2019. The Forum has been attended by senior officials of international organizations, representatives from around 140 countries.

Since 2017, the Forum has been showing the need for interaction with NGOs. The topics of discussion of the Forum 2017 covered corporate social responsibility programs, the implementation of humanitarian initiatives, and the public sector’s cooperation with NGOs. The two messages leading the meeting were: any investment project needs a humanitarian component. The costs borne by the state will primarily lead to an improvement in other’s people lives, their health and safety.

The SPIEF-2018 was more focused on “work on the ground initiatives,” as well as with their performance evaluation. In this regard, coordination at the international level alongside the public sector’s active participation in overcoming the obstacles of the agricultural sector of countries is necessary. Going beyond the scope of symbolic activities, corporations make a significant contribution to the implementation of programs aimed at improving the social situation, the quality of life, the provision of humanitarian and medical care services, as well as combating epidemics. Moreover, the state and business’s interaction reduces the risks of natural disasters, but the market underestimates the effectiveness of investments in security. In this regard, state bodies should provide new conditions for beneficial cooperation with the entrepreneurs.

The SPIEF-2019 brought to the surface the digitalization and the level of women’s participation in solving global problems. The topic diversified more into humanitarian cooperation of the state and business on healthcare, culture, education, and digitalization. For the first time, the African continent became more active as representatives from some African countries attended SPIEF. The parties expressed the necessity to develop joint educational programs in education globalization and the labor market. Participants concluded that the digital economy provides women with more opportunities for self-realization. However, to popularize a successful woman’s image and create comfortable working conditions for women, there is still a lot of work to do.

The African direction from 2019 is becoming predominant. Hence why the regional movement of the Russian humanitarian mission is primarily aimed at the South. It is also worth highlighting the Russia-Africa dialogue. Over the past 20 years, African countries have improved cooperation significantly. The problems identified during the discussion are as follows: underdeveloped infrastructure in Africa’s transport, energy, and finance; the African economic overdependency on natural resources; and insufficient level of business interests in Africa. The participants concluded that it is necessary to stimulate cooperation and raise business awareness of the African and Russian markets’ possibilities.

The development of relations between Russia and Africa is officially recognized as a priority. The problem of mutually beneficial Russian-African cooperation is highly multifaceted, far-reaching and essential to ensure Russia’s interests in the international arena. The expansion of Russian presence now results from an increase in the supply of industrial and food products, development of investment cooperation, expanding Russian participation in the development of the economics of the African continent.

Russian-African relations have enough opportunities to play a prominent role in efforts to promote Russia’s humanitarian policy. Russian humanitarian policy needs a fundamental revision at the functional and regional levels. At the operational level, this is expressed in closer cooperation with NGOs and digital technologies to work more effectively on the ground. Through interaction with the regions, the importance of Africa has increased. For Russia, this is a promising area for promoting humanitarian values such as peace preservation and justice.

In this regard, Rossotrudnichestvo is perhaps the primary tool for implementing Russian humanitarian policy. Federal Agency for the Commonwealth of Independent States Affairs, Compatriots Living Abroad, and International Humanitarian Cooperation (Rossotrudnichestvo) was established in 2008 and today operates in 80 countries. As for Africa, the Russian centers of science and culture (RCSC) are open in Egypt, Zambia, the Republic of Congo (Brazzaville), Morocco, Tanzania, Tunisia, and Ethiopia; Agency representative works at the Russian Embassy in South Africa.

Thus, changes in Russia’s humanitarian policy abroad are expected with the appointment of the new head of Rossotrudnichestvo. Humanitarian policy needs to be revised both functionally and in interaction with the regions. Russia has historically promoted such values as peace preservation and justice. Based on the tendencies and intentions of Mr.Primakov, there is a potential for cooperation with local NGOs. After analyzing the discussions on the humanitarian topics of the SPIEF for 2017-2019, two more trends are emerging. In addition to working closely with the community, there is a need to use digital technologies. This will allow Russia to work not from organization to organization, but from organization to individual. The coronavirus pandemic has pushed Russian education towards cyberspace, which will allow more to receive it. These are precisely life, health, safety, the level of women’s participation in solving global problems that are the goals of humanitarian policy, Russia can and knows how to work on them. In connection with the strengthening of interaction in the Russia-Africa direction, this region is clearly coming to the fore for Russian work. It is the region, like no other, that needs peace preservation and justice. So why shouldn’t Russia satisfy the external demand having the resources to do so?

From our partner RIAC

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