Africa's future as an economic powerhouse

Tuesday, 21 October, 2014

Interesting piece published yesterday on Ventures Africa, where Emmanuel Iruobe summarises a recent expert discussion on Africa’s “current state of development” at the 9th African Development Forum of the United Nations Economic Commission for Africa (UNECA) — through the eye of a money man.

The focus is on investment. Stephen Karingi, UNECA Director of Regional Integration, Infrastructure and Trade, is quoted as saying post-meeting that, while those present were united in the belief that”Africa can potentially generate some $200 billion for sustainable development investment,” some serious house cleaning in terms of infrastructure and governance is going to be required first. 

“Africa is not poor financially,” he said, “but it needs to get its house in order. For too long we have allowed the narrative of Africa to be one about raw materials and natural resources coming out of Africa, yet Africa can take advantage of its own comparative advantages, including these natural resources, and become the leader in the value chains that require these raw materials.” 

No doubt this is true at the literal level; there are a number of caveats to realising the visions, though, and most of them are not secret — illicit financial outflows and leakages first among them.

UNECA’s estimate is that Africa loses $50 billion every year to to this leakage - as Iruobe points out, “almost the same amount of money it has received in terms of official development assistance.”

You can see this as distressing and depressing. Or you can see it as grounds for extraordinary hope. “If this is really the case,” Irubo argues, “Africa can be its own financial powerhouse if it successfully plugs in all the leakages.”

As evidence for hope he goes on to point out the World Bank findings that “of the 50 economies that improved in their regulatory business environment in 2013, 17 are from Africa and many of these countries rank ahead of China, Brazil and Russia.”

Comparing yourself to Russia in order to draw attention to high standards of financial probity is perhaps not the most solid stance on which to trumpet a new dawn for investment - but our usual snide editorial tone aside the fundamental point is sound.  

To get where the continent needs to go, then, there is work to do. As the author states, “the onus is still on the emerging continent to leverage its enormous potential and unlock its financial resources by a combination of private equity investment, remittances, domestic resource mobilization and, of course, tying all financial loose ends.”

Just that, then…

From the piece:

Adama Elhiraika, Head of Macroeconomic Policy at the ECA, speaking on the same topic commented; “We need to get our policies right and allow for the kind of investments that people can make in Switzerland. Given the size of Africa, there is need to promote free movement of capital, which is as important as the free movement of goods and services in boosting trade and investment.”

The African Development Forum aims to establish connections between the importance of mainstreaming resource mobilization and the reduction of trade barriers into economic, institutional and policy frameworks, and scaling up in pursuit of the post-2015 continental development goals. This year’s edition focused exclusively, for the first time, on the continent’s development with discussions bordering around promoting Africa’s capacity to delve into innovative financing mechanisms that will result in transformative development on the continent.

One further point we at CSR21 would like to point out - not hugely perceptive, perhaps, but something of an elephant in the room - is the value of investment specifically in children, given the demographic transition the continent's currently experiencing. Yup, social investment. Africa has the youngest population in the world, and 130 million kids call Sub-Saharan Africa home. Put a big slice of that 50n a year into feeding, protecting and educating them, and in a few decades time we’ll be looking at another dynamic entirely.

IMAGE: "Fisherman" by Bezalel Ngabo. Acrylic on Canvas 80 x 60"