By David Colhoun The Afro News Vancouver : A continent riven by conflict and poverty, Africa faces many challenges but it also possesses the potential to transform and enrich itself in the coming decades. There are of course many obstacles to overcome, and challenges to face, but through effective use of the inherent natural riches she possesses the possibilities are staggering. With the rampant economic and population growth in and development of China, India and many other developing economies the demand for natural resources and food is set to explode in the coming decades. Indeed, it has already begun with prices for almost every commodity experiencing huge increases over recent years. That this trend will continue and gain momentum is one thing almost every economist, strategist, academic and politician can agree on, the world over.
Jim Rogers, a renowned investor and founder, together with George Soros, of the famous (and occasionally infamous) Quantum Fund, has long been a proponent of the belief that the incredible growth occurring in China and other developing nations will have and has had a tremendous effect on the prices of most, if not all commodities. In 1998 he created the Rogers International Commodity Index® which represents the value of a basket of commodities consumed in the global economy, ranging from agricultural to energy and metals products. In the 13 years since its inception it has increased in value by over 340%. Rogers expects this growth to continue in years to come and has put his money where his mouth is by investing a large portion of his vast wealth in the index. This will create tremendous hardship for many countries and peoples but bring huge wealth to those who possess or grow these commodities.
The natural resource and food production potential of the African economy is immense. While it is true to say much of the continent has difficulty producing enough food to provide for its people, this is as much to do with inefficiency, corruption and lack of expertise as it does natural phenomena and adverse weather conditions. Much of the continent has fertile lands, favorable climate and a huge agricultural workforce that could produce a far higher amount of food and agricultural commodities than is currently the case. A classic case in point is Zimbabwe, which in the very recent past was renowned as the “Breadbasket of Africa” producing and exporting huge amounts of food and other agricultural products. Although this situation has changed due to the corrupt, cruel and wasteful regime of Robert Mugabe, there is no reason to believe those days could not return under better governance and new leadership in future years. Unfortunately the increases in the price of many food stocks and grains has brought hardship to grain importing countries in Africa and there will certainly be losers as prices continue their inexorable rise, but their will also be winners. Food production companies across the world are starting to turn their heads toward the vast fertile lands across much of Africa for investment and development.
Additionally, in terms of non-food commodities, Africa contains huge untapped potential for oil/gas and mining. Production of oil and gas in North Africa and Nigeria has long been a huge source of revenue for those parts of the continent. Africa is thought to contain 10% of the world’s deposits of oil and already supplies approximately a fifth of US oil imports and a third of Chinese imports. With oil and natural resource prices on a sharp upward trend for most of the last decade, this revenue could increase exponentially should the trend continue. There are many areas of Africa that have yet to be properly explored for natural resource potential and the proportion of global reserves may be higher still. South Africa is a leading player in the global mining sector, as are some of its neighboring states. South Africa is already crucially important to the global economy in many aspects, being the worlds largest producer of platinum and manganese, the second largest producer of gold and palladium and the third largest producer of coal.
Recent years have seen huge new deposits of oil and gas discovered in central African states . While most of the exploration and production is driven by Western corporations they are increasingly keen to be seen as ethical producers to both their shareholders and to African governments and people. A good example of this new mindset is the small but growing Irish headquartered Tullow Oil. Tullow has recently discovered sizable deposits of hydrocarbons in both Uganda and Ghana and has focused its production and future growth on Africa. The company has made concerted efforts to employ and educate local people in both projects, garnering much favor with the governments involved. It has also been more willing to pay local taxes than some of the larger major oil companies, which may have as much to do with its strong dependence on these large finds as it does its stated ethics. Tullow has also recently announced a listing of a portion of its shares on the Ghanaian Stock Exchange in July 2011, which is almost unprecedented, and has stated intentions of doing the same in Uganda. The company’s Head of Investor Relations, James Arnold, recently told the Financial Times that their strategy of investment in Africa was “……about continuing to embed ourselves in Ghana and allowing local investors to benefit from Tullow’s assets across Africa and elsewhere.” If this is a sign of things to come, then it is a positive one not only for the economies and people of Ghana and Uganda but perhaps signifying a new fairer way of doing business and a more equitable distribution of the spoils.
There are also good examples of positive developments with resource-rich African states using their wealth to enhance the living conditions of their people and the infrastructure of their countries. We are all familiar with stories of despotic African regimes misappropriating the wealth derived from natural resource production to feather the nests of their families and cronies but it is incorrect to view this as completely typical. Botswana is rich in diamond deposits, has one of the highest levels of income and development and possesses one of the most vibrant and stable democracies on the continent. Surprisingly Botswana (at $15,000 per person) has a higher GDP per person than the oil and gas rich North African states such as Libya and Algeria and even its neighbor South Africa. The economy is highly dependent on diamond production but the government has taken the admirable approach of prioritizing economic diversification for future years. There are of course critics of Botswanan governance and it is by no means perfect, but credit should be given where it is due and they do many things right. If more African nations could follow their lead it would greatly improve the lives and economic prospects of their respective populations.
Instead of remembering its past of colonization and oppression, Africa should look to its future and attempt to capitalize on its many advantages and gifts. With foresight and intelligence it is entirely reasonable to hope and believe that the African economy’s best days are ahead of it. While the western world may have peaked in terms of economic growth, for Africa the only way is up.
David graduated from the University of Limerick in Ireland with a BA in History, Politics and Social Studies. He followed that with a Postgraduate Higher Diploma in Business Studies and the UCD Smurfit Graduate School of Business. He spent 7 years working in Finance, including 6 years with a Stockbroking and Wealth Management firm in Dublin. He moved to Canada in 2009 with his wife and presently works for a large business association in Vancouver