We argued last week that the successful use of the state’s resources can be a game-changer in Africa. We cited the examples of Ethiopia and Rwanda: both countries have tapped external resources heavily to drive their investment programmes.
This was the obvious decision because, as Sanjeev Gupta of the Africa Finance Corporation argued at the Business Council for Africa’s (BCA’s) recent annual debate in London, 50 of the 54 African countries are too small to attract investment outside a subregional grouping.
- Nigeria would be one of the four countries exempt from Mr. Gupta’s observation. This helps to explain its reservations over the African Continental Free Trade Area (AfCFTA), along with concerns over the impact of additional imports on its manufacturing sector. We understand that members of the African Union have until September to sign the treaty.
- In contrast, Zimbabwe would be one of the 50 countries and has drawn heavily upon support from China. A new 300 megawatt (MW) power station, Chinese built and financed, has recently started production.
- More broadly, its new president, Emmerson Mnangagwa, is looking to open doors to an international community that largely shunned Zimbabwe under his predecessor. He has identified foreign capital as the means to reverse the emigration and rising poverty of the past two decades.
- The senior representative of MUFG at the BCA debate noted that there are 250 Japanese companies operating in Africa, compared with 10,000 Chinese firms. However, they are finally on the move: examples include the building of ports in south-west Africa, the Toyota fertilizer operation in Kenya and the same company’s acquisition of CFAO (the totemic French conglomerate).
- Liam Fox, the UK secretary of state for international trade, spoke of the cover for official export financing now available in currencies such as the naira, the Kenyan shilling, and the Ghanaian cedi. He shared the catchy “buy British, pay local” message.
- Another route to tapping external resources lies in engagement with the diaspora. This point was made by Kuseni Dlamini, the chairman of Massmart.
- Africa’s share of global trade has slumped from 7% in the 1960s to 2% so a response from governments is overdue. This could be regional integration such as the AfCFTA, together with closer financing toes with Africa’s many external partners. We do not think there is one pre-eminent route. It is clear, however, that governments cannot duck globalization and that they have to push job creation and growth to match the pace in the rest of the world.
FBNQuest