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Asia is poised to play dominant role in Africa’s future growth in the wake of Brexit
Western governments and multinationals have played a significant role in Africa’s growth in the past with the European Union (EU) being the continent’s biggest trading partner. But, in a post-Brexit world, Africa will be looking increasingly to the East for investment and expertise.
Asia-Africa trade has been growing exponentially in the past decade. Alongside China’s ‘One Belt One Road’ initiative, more Asian economies are now showing interest in ramping up their African investments, attracted by rising urbanisation and consumerism across the continent.
The fact that Japan chose to host its annual Tokyo International Conference of African Development in Africa for the first time is just one example of the growing ties between the two continents. The conference in Nairobi at the end of August explored the potential improvements in Africa’s health system, paving the way for stronger multilateral cooperation and future trade partnerships.
Asia’s leading financial centres are keen to play a central role as finance, shipping and aviation hubs for increasing Asia-Africa trade.
Singapore’s expertise in consumer industries such as airlines, education and healthcare could pave the way for more Asia-Africa business collaboration. The city state is already sharing its experience in how to achieve sustainable economic development through its Singapore Cooperation Programme, and we expect to see more growth-supporting initiatives like this in the future.
Improving business prospects
Of course, trade between Asia and Africa is not without its challenges, limiting near-term trade potential. Red tape and poor infrastructure make investing in Africa harder, but as relationships between African and Asian governments strengthen, long-term business prospects will improve.
While some people worry the slowdown in global growth and subdued commodity prices will impact Africa’s growth and investment potential, the continent is demonstrating resilience. Its key drivers for growth remain intact, including attractive demographics, urbanisation and a rise in consumerism.
Côte d’Ivoire, Tanzania, Kenya, Senegal and Ethiopia are just some of the African economies currently performing well, and Sub-Saharan Africa is expected to post growth of 4.1 per cent in 2017 and 5.2 per cent in 2018.
Attractive opportunities abound, including in the power sector. Africa has about 13 per cent of the world’s population, but only half of its citizens have access to electricity, so the opportunity for Asia to play larger role in powering Africa is huge.
Investing in Africa requires strategy and commitment. However, given European growth uncertainties in the wake of the UK’s decision to leave the EU, we expect Africa’s relationship with Asia to evolve. By investing in the growing opportunities and sharing expertise, Asia is set to play a bigger role in Africa’s future.
Sunil Kaushal is Standard Chartered Bank’s Regional Chief Executive Officer, Africa and Middle East
By Sunil Kaushal
The regional growth in sub-Saharan Africa is projected to reach 2.6 percent in 2017 as economic growth rebounds in 2017 after registering the worst decline in more than two decades in 2016, the new Africa’s Pulse report by the World Bank has said.
Africa’s Pulse shows that the continent’s aggregate growth is expected to rise to 3.2 percent in 2018 and 3.5 percent in 2019, reflecting a recovery in the largest economies.
It will remain subdued for oil exporters, while metal exporters are projected to see a moderate uptick.
GDP growth in countries whose economies depend less on extractive commodities should remain robust, underpinned by infrastructure investments, resilient services sectors, and the recovery of agricultural production.
The Africa’s Pulse report, a bi-annual analysis of the state of African economies this time projects that there are signs of recovery within the region.
However, the recovery remains weak, with growth expected to rise only slightly above population growth, a pace that hampers efforts to boost employment and reduce poverty.
The report revealed that, Nigeria, South Africa, and Angola, the continent’s largest economies, are seeing a rebound from the sharp slowdown in 2016, but their recovery has been slow due to insufficient adjustment to low commodity prices and policy uncertainty in the countries.
The latest Africa’s Pulse report also reveal that seven countries (Côte d’Ivoire, Ethiopia, Kenya, Mali, Rwanda, Senegal, and Tanzania) continue to exhibit economic resilience, supported by domestic demand, posting annual growth rates above 5.4% in 2015-2017.
The countries aforementioned the reports shows, house nearly 27% of the region’s population and account for 13% of the region’s total GDP as the global economic outlook is improving and should support the recovery in the region.
On the domestic front, risks to the current recovery stem from an inadequate pace of reforms, rising security threats, and political volatility ahead of elections in some countries.
Presenting the report World Bank’s Chief Economist for the Africa Region Albert G. Zeufack said “as countries move towards fiscal adjustment, we need to protect the right conditions for investment so that Sub-Saharan African countries achieve a more robust recovery.”
“We need to implement reforms that increase the productivity of African workers and create a stable macroeconomic environment. Better and more productive jobs are instrumental to tackling poverty on the continent,” he added.
Mr. Zeufack admonished African countries to undertake the much-needed development by spending while avoiding increasing debt to unsustainable levels.
According to him the African environment though has a weak economic growth, the continent is in dire need of necessary reforms to boost investment and tackle poverty, as government must promote public and private investment, to undertake infrastructure development, which he believes should be priority.
The new Africa’s Pulse report this time, dedicates a special section to analyzing the region’s infrastructure performance across sectors, which revealed dramatic improvements in quantity and quality of telecommunications contrasted by persistent lags in electricity generation and access.
The author of the Africa’s Pulse report and Lead Economist at the World Bank Punam Chuhan-Pole said “with poverty rates still high, regaining the growth momentum is imperative. Growth needs to be more inclusive and will involve tackling the slowdown in investment and the high trade logistics that stand in the way of competitiveness.”
Overall, the report calls for the urgent implementation of reforms to improve institutions that foster private sector growth, develop local capital markets, improve infrastructure, and strengthen domestic resource mobilization.
Source: Norvan Acquah - Hayford/thebftonline.com/Ghana
South Africa's credit rating could get downgraded deeper into junk status if political uncertainty triggered by the recent firing of the finance minister stalls reforms needed to grow the economy, an executive from S&P Global Ratings said this week.
"There are risks that potential growth outcomes could be weakened, especially with uncertainty that's been brought along in a year where you may not get strong decisions for strong reform programs," said Gardner Rusike, the associate director and lead analyst for South Africa at S&P.
S&P downgraded South Africa's sovereign credit rating to BB+ with a negative outlook from BBB- grade on April 3, saying the firing of its internationally respected finance minister Pravin Gordhan posed a major risk to fiscal policy. The new Finance Minister Malusi Gigaba has said Treasury is committed to fiscal consolidation plans outlined in the 2017 budget after S&P and Fitch downgraded the country to sub-investment grade.
Rusike said political jostling ahead of the ruling African National Congress's conference at year-end, where the party will elect leaders to contest general elections in 2019, was likely to distract government from implementing economic reforms.
"You are probably looking at a much longer time line when you are talking about the path of economic growth that can help to stabilise debt," Rusike said. "We've had three downgrades over the last four or five years which means that the credit story for South Africa has been deteriorating."
The country's net debt currently sits just below 50 percent of gross domestic product, at around 2.2 trillion rand ($165 billion), and in recent budgets the treasury has said the cost of servicing that debt has been one of the fastest growing items.