By all estimates, the economic engine for a majority of African countries has already warmed up and is headed for the runway ready for take-off. Africa is ready to move from frontier economy to an emerging market status or even better.
However, before it gets into the runway, Africa must shed off some unnecessary baggage. This means a closer look at trading and development partners and a closer scrutiny of the continent’s political leaders, say credible researches. The question is; who shall be her partners in this take-off stage? Since the continent cannot wait to take-off, it has to trash or limit its association with laggards who slow it down to a bare minimum. Among the laggards, analysts say, is the West including the eurozone. And a number of recent analyses on African economies stop short of telling Africa to dump the West.
The west, defined to include Western Europe, North America and Japan are going through economic and financial turmoil of their own. The crisis in the Eurozone is a sovereign debt crisis meaning that countries are unable to re-finance their government debt without the assistance of third parties. This has forced many governments to result into austerity measures, that is, cutting back on public expenditure with the resultant contraction in employment and domestic consumption. The crisis may take a long time to end and during this period, Eurozone will be an unreliable development and trading partner.
Not that it was a reliable one anyway. Even before the crisis, the West was the mill in Africa’s development until China and India burst into the scene. The West kept on introducing new excuses to avoid honoring its commitment to Africa. The debt crisis, that burst into the scene recently may have been long in the making, hence the excuses to delay disbursing funds. Consequently, most countries in Africa shifted the attention to emerging economies.
This means that Africa must move fast to diversify and deepen trade and economic links with the South - China, India and Brazil, the so called BRICS countries. A report by the global accounting firm Ernest Young www.ey.com, points Africa in this direction.
The report, Africa attractiveness 2011 -whose theme is the optimistic “it is time for Africa” - says that that a majority of investors in North America and Europe are pessimistic about Africa. Only 38 per cent of respondents in North America and 45 per cent in Europe see any prospect for Africa soon. In sharp contrast, 86 per cent of investors in Africa say there has been improvement.
This position is supported by 74 per cent of respondents in the Emerging Markets and 66 per cent in Asia. In an Opinion piece in the same report, the CEO of Siemens Africa Region, Dirk Hoke, says “there is a perception gap On Africa.” A condition blamed on negative reporting by the media in the North. Overall, Africa attractiveness 2011 says that Africa is on an upward trajectory economically, politically and socially. Not surprisingly fund managers in the emerging economies are reportedly mobiliising private funds to invest in Africa. An estimated US$2 billion, say reports is already in the hands of these managers seeking for investment avenues in Africa.
The shift may not cost Africa much in terms of trade or development aid. Even before the Eurozone crisis, its significance as Africa’s trading and development partner was shrinking. In the last decade, financial aid to Africa has declined to just about $41 per capita compared to domestic revenue collection which has hit $441 per capita. Any shortfall will be mitigated by mobilisation of domestic sources or by FDI.
In fact, Africa is shifting away from Aid to investment following the discovery of oil, natural gas and other minerals in areas previously thought unviable. For instance, Tanzania is the largest recipient of donor funding in East Africa. However, the discovery of large quantities of LNG is expected to attract more FDI into the sector and reduce donor dependency.
In terms of trade, intra-Africa trade is growing and in some instance has surpassed trade with the West. For instance, according to a statistical abstract published by the central bank of Kenya, in 2011 intra-Africa trade exceeded trade with the West. Africa imported 48 per cent of Kenyan exports while the West absorbed 24 per cent. In fact, Uganda absorbed more Kenya exports ($904 Million) than UK and the US combined who absorbed US$860 million in 2011.
According to the UN economic commission for Africa, intra-Africa trade rose to 11 per cent in 2010 from Nine per cent of her total trade in 2006. The Commission, quoting WTO says that intra-regional trade in other parts of the world is 65 per cent. Though not stated in so many words, the report is urging Africa to target the same level of trade.
The development of intra-regional infrastructure, especially roads, is geared towards achieving this goal. Africa development Bank, the regional development finance bank, has led in this paradigm shift. It is quick to finance intra-regional infrastructure developments.
The UN Economic Commission for Africa, UNECA, www.uneca.org, in its Economic Report on Africa, 2012, is upbeat about Africa’s prospects. It attributes Africa’s Economic and political revival to decades of good house -keeping. The report, whose theme is unleashing Africa’s potential as a pole of global growth says that improved economic and political governance, reduction in armed conflicts, increasing foreign capital and improvements in the business climate—as well as rising commodity prices,” underpin Africa’s economic revival.
The report is no idle chest thumping; Africa has posted a robust 5.6 per cent growth between 2002 and 2008 being second only to Asia. In the last decade, 10 of the 15 fastest growing economies were in Africa. Further African economies have proven resilient, almost shrugging off financial crises that left the North badly bruised.
The Commission calls on African countries to vigorously pursue economic diversification and structural reforms to be able to weather external shocks from the euro debt crisis. Further, it calls on Africa diversify their export destinations, expand economic partnerships and deepen intra-Africa trade and investment. Intra-Africa investment is growing, other reports say.
In the long haul, concludes the report, Africa must invest in infrastructure and human capital in order to grow faster and become a global growth pole by unleashing its productive potential. This theme is the mantra of African development Bank