Africa: an emerging destination for investments

One of the major audit firms recently published its index on the attractiveness of Africa for 2017[1]. The report puts into perspective the economic trend of the continent in a rigorous and detailed way, enabling us to avoid the two pitfalls of Afro-optimism or Afro-pessimism.

It should first be noted that 2016 has been the worst year in terms of economic growth for sub-Saharan Africa over the past 20 years. The continent has been hardly hit by the end of the super-cycle of commodities, particularly impacting Nigeria, Angola and South Africa. The geopolitical upheavals of the West such as the Brexit and the election of Donald Trump also contributed to diminishing or at least stagnating investments from these countries which are important investors in Africa. However, while the number of FDI projects fell by 12% in 2016, they increased by 32% in value terms (reaching $ 94.1 billion), making it the second region of FDI growth at world.

Obviously, Africa is not a homogeneous bloc and in fact there are great disparities between countries. The three major countries impacted by the drop in the commodity prices mentioned above should not distract us from the bigger picture that reveals the growing young shoots in French-speaking Africa as in East Africa. While Morocco, South Africa, Kenya, Egypt and Nigeria attract the bulk of FDI projects (57%), other investment hubs appear. Ghana (4th), Côte d’Ivoire (7th) and Senegal (9th) attract investors, as evidenced by their ranking in the Africa Attractiveness Index. On the other side of the continent, growth is also very strong with an average of 6% for Kenya, Ethiopia, Tanzania and Uganda. These last two being boosted by the recent discoveries of oil and gas fields.

As nature abhors the vacuum, Asia-Pacific, especially China, has filled the decline in investment from the United States and Great Britain. China is now the third largest investor in terms of FDI projects in Africa, with the strongest growth in terms of jobs created. Note also the breakthrough Japan has seen its level of investment and jobs created increase by 757% and 106% respectively.

These figures, which show a real enthusiasm of investors for the African continent, remain to be relativized and taken in retrospect. Africa still receives an inadequate share of global FDI (11.4%) in terms of its population and its potential. Long coveted for its natural resources, the diversification of the African economy is underway, driven by the dynamism of sectors such as transport and logistics or the automobile. It is also worrying that the share of investment projects carried by African investors has continued to decline since 2013, falling to 15.5% in 2016. This contributes to the degradation of Africa’s resilience to external shocks ‘economy.

That Africa is attractive to foreign investors is a good thing, but it must also become an opportunity for African investors themselves! That is why we must redouble our efforts to achieve greater regional integration and a policy of reducing barriers to trade between the countries of the continent. History has shown that these choices lead not only to economic development but also to political stability, two essential objectives for ensuring the well-being of the population.

[1] EY’s Attractiveness Program Africa, « Connectivity redefined », May 2017

Formal sector versus informal sector: towards reconciliation

More often than not, particularly in Africa, we are used to opposing the formal and informal sectors. Shouldn’t we adopt for once a holistic approach of our economies and try to integrate more and more the informal sectors of our economies by the means of smart and fair policies?

Behind this somewhat negative word, the informal sector – understood as all activities that are beyond the control of the state, whether legal, social or fiscal – there are artisans, mechanics, tailors, merchants, taxi drivers, masons. In short, people who scrap a living. But in this logic of day to day survival, these men and women also walk down a precarious path in the medium to long term. What can you do if you get sick when you only have a small job to earn money to pay for the day’s food? What happens when the informal worker, one he is too old, no longer has the strength to work? It is easy to understand that above all, one must escape from the logic of survival in which too many of our fellow citizens are stuck, often against their will.

According to the African Development Bank (AfDB), the informal sector accounts for an average of 55% of cumulative GDP in sub-Saharan Africa. In some of our countries, the workers who produce this wealth sometimes count for the majority of the active population. Statistics are lacking, but in a report on the informal sector published last May, the International Monetary Fund (IMF)[1] indicated that informal employment accounts for between 30 and 90 per cent of non-agricultural employment in sub-Saharan Africa. Let us recall that there is no clear frontier between the formal and informal sectors: legitimate companies may indeed use informal contractors for certain matters, for example on a construction site.Even the IMF, a former vocal critic of the informal sector, in the report we have just mentioned, shows that times have changed and that the informal sector can be a growth opportunity for our economies.

While international experience indicates that the share of the informal economy declines as the level of development increases, most economies in sub-Saharan Africa are likely to have large informal sectors for many years to come, presenting both opportunities and challenges for policymakers”, the report says. This is all the more true as the number of jobseekers increases exponentially and as a “fight” against the informal sector will deprive our states of an important safety valve, especially for youth. Remember that to absorb new workers, Africa must create 122 million jobs in the next ten years. The IMF adds: The challenge for policymakers, therefore, is to create an economic environment in which the formal sector can thrive while creating opportunities for those working in the informal sector to maintain or improve their living standards”.

Bringing these individual or family businesses into common law is not an easy task, but there are ways and means to make it happen, and above all a strong argument in favor of this move: entering the system makes it possible to fight precariousness, especially if sound policies of health insurance and retirement pensions are accompanying this regularisation. Under no circumstances should policies appear to be a tax burden on micro and very small informal enterprises. Policies must promote access to banking services and improve productivity of these small businesses, so that they create more jobs, pay social contributions for employees, and, only in a second phase, provide tax revenues to the state.

 

[1] Regional Economic Outlook, IMF, May 2017.

Africa Nutrition Map

African Heads of State and Government committed to the goals contained in the 2014 Malabo Declaration, which acknowledges that agriculture and food security are key determinants of nutrition that require coordinated and comprehensive responses from other sectors, including health, education, labour, social protection, and coordinated collaboration with multiple stakeholders.

While it is a well-known fact that Africa hosts half the available arable lands in the world, as a continent Africa still disproportionately suffers from hunger and hunger related diseases such as stunting or malnutrition.

On the margins of the 13th Comprehensive Africa Agriculture Development Programme[1] Partnership Platform (CAADP PP) in Kampala, Uganda, the NEPAD Agency publicised the Africa Nutrition Map.  The Africa Nutrition Map is a tool that indicates hot points on the continent with regards to hunger, malnutrition, and food insecurity.  The map also indicates the growing prevalence of less covered “rich country diseases” on the continent such as obesity or diabetes.

The NEPAD Nutrition Map provides a snapshot of Africa’s nutrition context as at the end of 2016. Too many people still suffer from hunger in Africa. Hunger is a by-product of poverty, but the Nutrition Map also provides points to the opportunity for African leaders to take advantage of the continent’s huge agricultural potential in ensuring the provision of nutritious food,” said Kefilwe Moalosi, NEPAD Agency’s Nutrition Programme Officer.

Africa still imports USD$50bn worth of food each year, even though agriculture and its value chains could provide more employment to its youth and food security to its citizens. CAADP was adopted by the continent’s leaders as the framework within which to redress these and other challenges, by putting the necessary reforms in place to trigger the green revolution that Africa needs. 

[1]CAADP, short for the Comprehensive Africa Agriculture Development, is an African-wide agenda designed to support the transformation of the continent’s agriculture for sustained food security and socio-economic growth.

Africa Day, 25 May 2017

Africa Day is a time for reflecting on who we are – an enterprising, innovative and resilient people. Today we not only celebrate who we are and our achievements, but we also focus on our continent’s future.

25 May, Africa Day, is a day for celebrating the occasion when the Organisation of African Unity (OAU), the precursor to the African Union, was formed in 1963. It is a day when we celebrate the progress made by Africans, while reflecting on the common challenges we face in a global environment.

Industrialisation is the one area in which the continent of Africa needs to make rapid progress. It is not an overstatement that industrialisation is a critical engine for economic growth and development. If managed prudently and effectively it can contribute to creating employment opportunities and re-position the continent to becoming competitive in the global trading environment.

This year, the NEPAD Agency commemorates Africa Day by also celebrating the innovations that entrepreneurs on the continent are developing, under the African Union theme for 2017, Harnessing the Demographic Dividend through Investments in Youth.

The growing extent of youth unemployment poses a fundamental challenge for the whole of Africa. About 60 percent of the unemployed are under the age of 25 and young women are especially affected.

On the positive side, Africa has the youngest population in the world, and it is this population that will supply the much needed human capital and innovations in the years to come, even as the continent becomes more and more industrialised.

Even as the continent faces the challenges of integration and industrialisation, many are the innovations that young enterprising Africans are developing to redress development challenges on the continent. Many are the innovations by young Africans that need to be up-scaled that provide solutions in the areas of biosciences (including agriculture), climate change adaptive innovations, ICTs, advanced manufacturing, to name but a few.

On this special day for Africa, we therefore make a call for the need to ensure that investment into industrialisation and innovation is at par with the growing demands for skills development, employment and entrepreneurship from our youthful population. With a footprint in 52 countries on the continent, the NEPAD Agency provides the gateway to boost the expansion of innovations, providing African solutions to Africa’s challenges. Indeed, the more we think regionally, the faster we can grow into ‘The Africa We Want’ by ensuring the skills of our entrepreneurs and innovators are being shaped as they grow, resulting into the overall transformation of all regions on the continent.

 

Commemoration of the Africa Day: showcasing African innovations

Pretoria –  “The best way to believe in the future for Africa, is to believe in our innovations and in our innovators,” Dr Ibrahim Mayaki, CEO of the NEPAD Agency stated in his keynote address at an event held to showcase African innovations.

As part of the commemorations for Africa Day, this year the NEPAD Agency also celebrated the innovations that entrepreneurs on the continent are developing, under the African Union theme for 2017, Harnessing the Demographic Dividend through Investments in Youth.

“There is no better way to celebrate Africa Day than through innovations,” remarked Ms Teresiah Simelane, General Manager for Enterprise Development at The Innovation Hub in Pretoria, South Africa.

Dr Mayaki was speaking today at an event organised by the NEPAD Agency and The Innovation Hub to mark Africa Day, as a time for reflection, celebrating the progress made by Africans, while also reflecting on the common challenges and solutions the continent needs in a global environment.

Africa has the youngest population in the world, and it is this population that will supply the much needed human capital and innovations in the years to come, even as the continent becomes more industrialised. Even as the continent faces the challenges of integration and industrialisation, many are the innovations that young enterprising Africans are developing to redress development challenges.

The exhibition by entrepreneurs at the event in Pretoria, made the case for the myriad of innovations which exist on the continent and need to be up-scaled in providing concrete solutions to some of Africa’s challenges. The young entrepreneurs’ innovations provide solutions in the areas of bioeconomy (including agro-processing and health), climate change adaptive innovations and smart industries (ICTs and advanced manufacturing), to name but a few.

Participants at the event heard from entrepreneurs who showcased innovations from injectable bone graft substitute, to devices that help deaf communities and various other innovations in health, medical, food, beauty, pharmaceutical and manufacturing industries.

“We need innovations to trigger technological developments and other advancements in the framework of Agenda 2063, Africa’s vision for transformation,” Dr Mayaki said.  He added that, “The skills of entrepreneurs need to be shaped in such a way that as they grow, African economies can also grow, with the drive from the continent’s own innovative solutions.”

Dr Mayaki also stated that the commemoration of Africa Day with The Innovation Hub marks the first step towards strengthening collaboration with the NEPAD Agency.

A view from Gambia

Earlier this month I had the privilege to address a Ministerial Cabinet retreat of The Gambia. Some of you might recall that The Gambia was embroiled in a serious political impass between December 2016 and January 2017, and as you may remember the then president conceded defeat then changed his mind. Such an action if left unchecked could have culminated into a massive civil and political unrest in The Gambia with a potential spill-over into the neighbouring countries of Senegal and Guinea Bissau.

Certainly some level of divine intervention together with a well-coordinated approach by ECOWAS and the United Nations- potential disastrous ramifications of the former president’s actions was totally averted, and now The Gambia has set out an agenda to unify its people and re-ignite the economy and so on.

My address to President Adam Barrow of The Gambia and his cabinet, highlighted the principles of governance amongst others. But more specifically, I underscored the need for the president and his team of cabinet ministers to serve the people of The Gambia by providing and guaranteeing their security, protecting their welfare, meeting their basic needs, increasing their wellbeing and protecting the weak and vulnerable. Governments must do those things that give the people confidence, contentment, happiness and hope. My advice to them was that they must respond to the needs of their people for education and skills development, health, employment and social protection.

A responsible government must create the space to allow people to participate freely in the processes of governance. I emphasised to President Barrow that he and his team must build and maintain strong institutions of democracy and ensure that they strictly observe the separation of powers between the executive, the legislature and the judiciary. Furthermore, I sited the Singapore experience and also noted the significant strides that Rwanda is undertaking with regards to economic transformation and attracting private investments.

I concluded my address to the Gambian Cabinet by encouraging them to have a regional approach to doing things and I asked them to reflect deeply on where does The Gambia want to fit in Africa’s transformative agenda. And how quickly is the political leadership ready to establish a road map to achieving such a vision.

 

Africa poised for greatness — but governments must act fast

I am sharing an excellent article from Carlos Lopes on how Africa is underestimated :

Conventional wisdom tells us that the Chinese are buying up Africa faster than any other investors. It tells us that African banking lags in terms of innovation and reliability and that no African country is at the forefront of global innovation.

But conventional wisdom is often wrong and it is important to recognise that we don’t have the Africa we think we have.

What do I mean? Perhaps we can start by noting that China is actually only Africa’s third-biggest investor. The second? France. India is hot on its heels too. If that surprises you, wait until you learn that more than 50% of the world’s mobile banking happens on the continent, with Kenya taking the lion’s share globally.

MORE THAN 50% OF THE WORLD’S MOBILE BANKING HAPPENS ON THE CONTINENT, WITH KENYA TAKING THE LION’S SHARE

I enjoy these kinds of shock statistics, most recently sharing them with an audience of South African Institute of International Affairs members during an address on “World changes affecting Africa”, a talk I have also given to UN leaders, Chatham House and African Union foreign ministers.

Full article here