Africa News blog
African business, politics and lifestyle
from The Great Debate UK:
“Green growth” strategy viable for African economy
-Michael Keating is director of the Africa Progress Panel. The opinions expressed are his own.-
After a decade of solid progress Africa is now facing the daunting task - at a time of economic crisis - of maintaining stability, economic growth and employment, addressing food security and combating climate change. No country on the continent is escaping the impact of volatile fuel and commodity prices, the drop in global demand and trade.
The global economic crisis, however, is serving as a wake-up call for both African leaders and their international partners. The Africa Progress Panel’s 2009 report, launched Wednesday in Cape Town by panel members Kofi Annan, Graca Machel and Linah Mohohlo, argues just this.
Africa is rich in potential and there is an, often overlooked, opportunity to be seized. More investment is needed in Africa’s real economy, particularly infrastructure, renewable energy, agriculture and communications. The explosion of mobile telephony and spread of financial services to the poor have shown the potential for innovative development models.
There is also an opportunity to set a low carbon growth and development agenda, investing in the Africa’s vast solar, hydro, wind, thermal and biomass resources. A continental "green growth" strategy might attract the financial and technological support of richer countries, not least as Africa can contribute solutions to the global climate change challenge. Investment in such initiatives will not only generate jobs and boost trade in Africa, but also create markets for the world.
To cope with crisis and to seize these opportunities, Africa needs determined and accountable leadership at the national level and concerted presence and negotiation capacity on the global stage. Sceptics see both in short supply and fear that crisis will unravel progress on governance and accountability.
But this does not mean that the rest of the world can walk away. Whilst the primary responsibility rests with African leaders, businesses can play a key role, as can Africa’s trading and donor partners.
Is Africa a good bet?
For those looking to invest in Africa, the best prospects are in Nigeria and Ethiopia according to a new index of potential investment destinations published this week.
But should anybody want to put money into Africa at a time the global financial crisis and falling prices for export commodities, on which the continent is so reliant, have discouraged investors who had begun to see some African countries as promising frontier markets?
“Africa is going to overtake the Middle East to become the second fastest growing region in the world after emerging Asia. It will be affected by the global financial crisis but it is much less exposed than many places,” Katharine Pulvermacher, chief executive of business consultancy African Rainbow said this week on the launch of its Star of Africa index.
The index’s creators told my colleague Peter Apps that potential growth in energy, water and communications consumption could amply reward investors taking the risk in Africa. South Africa, Mauritius and Tanzania took third, fourth and fifth place respectively on the index. Somalia, Chad and Eritrea were the least appealing countries for investors.
The International Monetary Fund’s most recent forecast of economic growth for Africa this year was 3.3 percent – much slower than the 5-6 percent of recent years but good by the standards of Western countries in recession. A senior IMF official noted recently, however, that African growth could be sharply lower than its forecasts.
“Remittances, tourism revenue and even aid, we feel could fall further,” said the IMF’s Africa Department Director Antoinette Sayeh.
The African markets that had attracted most foreign investment in recent years – not only developed South Africa but also countries such as Nigeria and Kenya – are among those that have so far been hardest hit, while smaller economies that may not have had so far to fall have been less touched.
China brings its own (unqualified and qualified)workers to Africa despite being more expensive. Guess that pretty much sums up what manufacturing opportunities in Africa are compared to countries like Vietnam or China.
How will Africa weather financial storm?
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.
The African Development Bank’s chief economist told Reuters that Africa should withstand the first round effects of the financial crisis but that export demand and access to finance could be hit in the longer term.
Although some still see Africa’s isolation as a measure of protection, the enthusiasm of frontier investors has been fading too. The impact can be seen on stock exchanges from Lagos to Lusaka. Ghana has postponed a new debt issue due to the global conditions.
Such things might not appear to have much direct impact for most people in Africa, but rising world prices for food and fuel are being felt even in the remotest villages. If the prices of Africa’s export commodities fall because of global turmoil then that pain is likely to be felt too. If rich countries can afford less aid, that could also be damaging for some dependent states.
And (Nick) be realistic. The west has made conditional aid availeble to the african countries on the condition that they purchase military hardware. A recent example is the (alleged) involvedment of france in sudan. this is a dog eat dog world, there are not many ‘friendly countries’ and every country acts in its own best interests whether it’d be at the expense of another country or not.
the western retailers have been pushing prices of commodities down (cocoa and coffee) to increase their own prices and keep western consumers happy. this has meant that african countries got lower prices for exports, while the costs of imports have gradually increased ( oil and other raw materials), they have had to finance this gap through aid; accumilating more debt.
Africa will not progress if it depends on aid including green aid. the leaders must be responsible to it’s people and aid just deters this responsibility.
When the policies and corruption is gone then Africa will move ahead. It has tremendous potential. I would say more than any other geographic location in the world but it must be responsible to make this happen for it’s people. Western aid hasn’t worked, one should look at the pragmatic approach of the Chinese.