Africa News blog
African business, politics and lifestyle
The dire state of rich countries’ public finances is likely to squeeze aid to Africa in the next few years, although it may be the bitter pill the fast-growing continent needs to wean itself off handouts.
Even though sub-Saharan economies grew at a pacy 5 percent before the 2009 global slump, aid to the poorest continent also rose after the Group of Seven (G7) richest states promised in 2005 to double development assistance.
The ONE Campaign led by Irish rockers-turned-lobbyists Bob Geldof and Bono said last month the G7 would miss that target, but was on track to provide $13.7 billion of the $22.6 billion extra pledged at the landmark meeting in Scotland.
Despite Africa’s huge population — now more than a billion — such increases have undoubtedly had a positive impact, especially in areas such as public health.
“Europe possibly needs an Afribond,” commented one contributor this week on the Thomson Reuters chatroom for fixed income markets in Kenya.
A nice quip from Henry Kirimania of The Cooperative Bank of Kenya and a reminder of just how much better placed Africa is now in terms of its debt burden than it once was and particularly in relation to what might now be regarded as the world’s Heavily Indebted Formerly Rich Countries.
My colleague Emma Farge has blogged on the confusion that arose in oil markets after reports of a coup in Niger caused erroneous rumours that last month’s military takeover had taken place in Nigeria, a similar-sounding country with its own history of interventions by the men in uniform.
This is not the first time the confusion has arisen. During my time as a correspondent in Lagos in the 1980s, a report appeared on the front page of a local newspaper saying Nigeria had rescheduled its foreign debt, an important issue at the time and a story I certainly did not want to miss.
A few days back, I had the pleasure to moderate a lively debate on investment prospects in Africa involving private sector panellists and representatives of the World Bank and International Monetary Fund.
The tone was upbeat, but discussion turned heated when it came to debt restructuring in Ivory Coast.
While it might sound obscure (and I won’t go into all the details) it raised broader questions about the role of the international financial institutions in Africa and how that may be reinforced by the global financial crisis.
The concern of some in the private sector was that foreign investors with exposure to local debt in Ivory Coast looked set to suffer the same restructuring terms that holders of foreign debt would have to bear – with the approval of the IMF. Their argument was that this would discourage foreign investors from buying local bonds in Africa.
The IMF came back robustly, saying it was only playing by the rules in Ivory Coast and suggesting that investors make closer checks before putting in their money.
But private sector participants were unclear where this might leave them in future, particularly at a time many African states are eyeing bond markets again.
Some voiced broader concern over how the international financial institutions see the private sector’s role.
Before the credit crisis, a number of African countries had begun turning to international capital markets. But Eurobond plans were put on hold when global markets seized up and the institutions stepped back in to provide emergency help to hard-hit countries. Amounts have been substantial even compared to the $10 billion in concessional financing promised by China over three years. The IMF board approved a $1.4 billion standby loan arrangement for Angola this week.
The question now is how this may change the longer term balance in sources of finance for African states.
Is the private sector overly wary of institutions that are simply doing their best to give emergency help now and fend off future debt crises? Or are those institutions muscling back in to impose their dominance in telling African states how they should go about managing their debts and getting the finance they need? How will Chinese money affect the balance?
Pictures: A money dealer counts the Nigerian naira on a machine in his office in the commercial capital of Lagos, January 13, 2009. REUTERS/Akintunde Akinleye; Dominique Strauss-Kahn, managing director, International Monetary Fund (IMF), is introduced at the International Economic Forum of the Americas conference in Montreal, June 8, 2009. REUTERS/Christinne Muschi
If you lived on an archipelago that defined paradise with palm-fringed white sand beaches and emerald green waters, you would expect a relaxed, lazy pace of life.
Lazy would be a generous description of the Seychellois soldier’s wave at the entrance to State House as I arrived with my local colleague George Thande – who is admittedly a regular visitor here.
African officials meeting in Tunis this week to discuss the impact of the crisis argued that the continent needed better representation, given the effects that the turmoil is having in Africa as well as the continent’s growing financial importance. The complaint could apply equally to other developing countries.
Isolation might seem like a good idea when it comes to the storm sweeping global finance and there is no doubt that African countries are among the most isolated in the world economy.
Avoiding the impact seems unlikely, though, particularly at a time when Africa as a whole has been enjoying its fastest growth for decades and the continent has become an increasingly popular investment destination – not only for Asian countries in search of resources but for frontier investors willing to take higher risks for higher returns.