Business & Economy

Faltering progress in Africa worries governments, investors

Faltering economic and political progress in Africa is a worrying sign to governments and foreign investors counting on the continent to serve as the next engine of global economic growth, one of Africa’s most prominent businessmen said early October.
‘Things are stalling,’ said Mo Ibrahim, who earned billions of dollars installing some of Africa’s first mobile phone networks. ‘We can’t pat ourselves on the back and pretend everything is hunky-dory; it’s not.’
An annual index of economic, political and developmental indicators compiled by Mr Ibrahim’s philanthropic foundation and released October 5 showed that the security and business environment in many of Africa’s 54 nations is not improving as rapidly as a decade ago, when the continent was hailed as the next great global economic frontier.
This year’s rating of 50.1 on a 100-point scale, while up from 46.5 when the index was first issued in 2000, is down from a peak of 50.4 in 2010. Under the Ibrahim Index of African Governance, 100 represents a prosperous, democratic utopia.
‘We really need to work a little bit harder to keep moving forward,’ Ibrahim told The Wall Street Journal.
Some of the malaise emanates from slumping commodity prices, which underpin the continent’s biggest economies. Dipping revenues from Nigerian oil, South African platinum and other raw materials are expected to slow economic growth across sub-Saharan Africa to 3.3 percent this year from 5 percent in 2014, research firm Capital Economics said.
When commodity prices were high and government coffers were flush, officials in Angola, Zambia and other countries did not invest enough in improving education, health care and roads, said the Mo Ibrahim Foundation’s executive director for research and policy Nathalie Delapalme.
With funds now drying up, even the most well-intentioned of the continent’s governments will have a harder time lifting their citizens out of poverty. ‘They could have been better positioned to confront the crisis that is in front of them,’ Delapalme said.
The torpor affecting Africa’s largest economies and the sinking value of their currencies are tearing at the social fabric, economists warn, especially in countries where life was already often punishing for most people.
In South Africa, already high rates of violent crime are escalating, and a quarter of those available to work, some 3 million people, have no jobs. Liquidity crunches have sparked fuel shortages in Nigeria and food shortages in Angola. Copper mining companies in Zambia are threatening to lay off thousands of workers.
‘Our people are beginning to lose patience,’ opposition Economic Freedom Fighters party leader Julius Malema told the American Chamber of Commerce in Johannesburg last week.
Mr Malema’s style of confrontational, populist politics is gaining ground in South Africa, as the ruling African National Congress fails to repair chronic problems with the country’s power grid and to improve labour relations. Other African countries could see similar calls to nationalise businesses and distribute government resources to the poor if they fail to provide for their citizens, said Johannesburg-based economist Thabi Leoka.
‘Many countries that most need economic takeoff aren’t getting it because their politicians don’t support widespread growth,’ Leoka said. ‘We don’t have exemplary leaders to tell other leaders they should be doing well.’
The Mo Ibrahim Foundation’s annual report indicates that even the continent’s recent success stories face daunting challenges.
The Democratic Republic of the Congo has climbed more than five points on the foundation’s scale of sustainable economic opportunity since 2011. But huge hurdles remain. The largest cities of Congo, a country the size of Western Europe, still are not connected by roads.
Congo is scheduled to hold national elections next year, and, if a referendum measure is approved allowing President Joseph Kabila to seek a third term in office, his party will be pitted against more than 400 rivals.
The prospect of continued political dysfunction and stalemate has caused some Congolese to talk openly about attacking the country’s parliament and other government buildings, as protesters did last year in Burkina Faso.
Not all is bleak and uncertain on the continent, the foundation’s report suggests. Mid-sized African countries are making strides towards more widespread economic growth and better governance. Cote d’Ivoire, which only four years ago was mired in civil war, climbed furthest in this year’s index.
Kenya’s economy is also growing swiftly. Authorities have made improvements to the rule of law, even as officials confront the menace of al-Shabaab terrorists from neighbouring Somalia.
Still, the portrait of a continent stumbling represents a reckoning for those who assumed Africa’s ascent inexorable, Leoka.
‘The whole Africa rising story is in question.’
Patrick McGroarty and Drew Hinshaw

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