By Tamzin A Hudson : Africa’s landscape has undergone a transition, particularly marked over the last decade and many of the old associations and attributes associated with the continent have fallen away being replaced by a new optimism. Encouraging reports and assessments reflect the changing picture that is emerging throughout, even in places one would least expect and in countries that were ridden by conflict just a few years ago.
The Work Bank’s latest “Africa Regional Brief” underscore this optimism stating that growth rates of 5,3 percent were posted in 2012 and forecasts that 2013 rates may be higher at 5,6 percent. It further adds that over a third of the countries in Sub-Saharan Africa enjoyed rates of 6 percent or higher and that 40 percent had rates of between 4 and 6 percent in 2012. In a report published by the United Nations Conference on Trade and Development (UNCTAD), foreign direct investment (FDI) rates for Africa were listed at between $55 billion and $65 billion for 2012. The projections are that FDI will rise to $70-$85 billion in 2013 and $75-$100 billion in 2014. So what is driving this changed outlook and renewed buoyancy? The report argues that investors have changed their perception of the continent regarding it as a destination that makes sound business sense and where solid returns can be expected. Africa has strong prospects in the commodity sector where prices are projected to remain steady. Ongoing economic reforms are set to further buttress this positive outlook. Allied to this is the fact that African economies are diversifying rapidly and high levels of FDI have been reported in the telecommunications, real estate and retail sectors. Africa furthermore has a young population and a booming consumer market. For the first time, the UNCTAD report notes that FDI from developing countries overtook those of developed economies. This marks a sea change in geopolitical terms and brings to fruition the long desired goal by developing countries to strengthen South-South trade.
In October 2012, the Ibrahim Index of African Governance (IIAG) was published. The Index tracks governance both from a country analysis and regional performance perspective by focusing on four primary categories, namely Safety and Rule of Law, Participation and Human Rights, Sustainable Economic Opportunity and Human Development. The report states that overall governance in Africa has improved since 2000. Several countries including Angola, Liberia, Rwanda, Sierra Leone and Zambia have shown marked improvements.
The category that outstripped the others was Sustainable Economic Development and Human Development scoring better than Safety and Rule of Law and Participation and Human Rights as highlighted in the 2010 and 2011 editions of the IIAG.
Africa’s relatively remarkable and rapid economic successes can largely be put down to the role of external actors, most notably China. China emerged as a global growth pole, which has transformed Africa’s economic fortunes. One of the main attractions continues to be Africa’s commodities. A report by the Carnegie Endowment for International Peace notes that Africa’s terms of trade saw an increase of 4.3 percent on average between 2000 and 2008 attributable to China’s large appetite for raw materials. This demand has also kept prices at positive levels.
China’s interest in Africa as a trade and investment location is set to continue and expand. According to a report in ChinaDaily.com, in 2011 China’s non-financial direct investment in Africa increased 58.9 percent year-on-year to $1.7 billion, according to the Ministry of Commerce. By the end of 2011, Chinese investment stock in Africa reached $14.7 billion, up 60 percent compared with 2009. Africa too is courting Chinese and other investors as the continent seeks to address unemployment and skills gaps in its drive to deepen and expand manufacturing, processing and ultimately embark on major industrialisation initiatives.
Ultimately, Africa has emerged as an attractive and profitable place to do business and 2013 is likely to see this trend continue. Indeed many countries, developed and developing are also likely to concentrate more energy on finding strategies to engage the continent so that they are well positioned to extend their economic leverage and play a role in its development. New and exciting investment opportunities have emerged in finance, aviation, medicine, infrastructure and agriculture.
2013 will also be an important year for Africa to make further progress in terms of its overall governance and address the needs of all its citizens to ensure more balanced and equitable growth and development and boost opportunities. As the well-respected Ibrahim Index on African Governance noted, Africa’s overall progress in the sphere of economic governance is not being matched by similar improvements in the political and human rights sphere. 2013 will see the spotlight turned on Africa’s so-called powerhouses, namely Egypt, Kenya, Nigeria and South Africa which received disquieting coverage in the IIAG report as registering unfavourable governance performances since 2006 where all four countries have declined in both Safety and the Rule of Law and Participation and Human Rights. Worryingly, Nigeria for the first time fell into the bottom ten governance performers on the continent. Africa needs these larger countries to be beacons of hope and transformation driving the possibilities and opportunities and underpinning the potential that is being unlocked.
The importance of 2013 is underlined by the Chairperson of the African Union, Dr Nkosazana Dlamini Zuma who writes in her New Year Statement that: “2013 will mark a momentous occasion for the continent: the 50th anniversary of the formation of the Organisation of African Unity, and 11 years of the launch of the African Union. As the Secretariat of the Union, the Commission will ensure that the marking of 50th anniversary is an important milestone in the history of the continent. It will be an opportunity to reflect on where we come from, appreciate where we are, and plan for where we are going in the next 50 years. In this regard, a long term African Union-wide strategic framework is under development. This is surely something to celebrate.