Africa 2012

By Asoka Ranaweera

The writer is the founder and CEO of a company that advises investors on structuring investments and developing projects in West, East and Central Africa

Rumor has it that the world will end in December 2012. Apparently, the Mayan’s have called it. Somehow our Mesoamerican cousin’s from Central America saw the end coming.

Could it be that Mayan priests are about to put even the best of Wall Street’s analyst’s to shame? After all few in Wall Street can claim to forecast events accurately for one miserly quarter let alone 5,000 years into the future?

Have the Mayan’s seen something most of us seemed to have missed? Lets see, there is a better than 80% chance that European politicos won’t be able to pass muster and put together a strong enough framework to ensure the euro as we know it survives.

Then there is the little matter of a U.S. presidential election in the offing, lets face it, do you really expect the Republicans or Democrats to compromise on anything? Forget about it, as a good old New Yorker might say.

Watch out; as I wrote in an article not too long ago on Africa, here come the BRICs? Not so fast though, Brazil registered negative growth of 0.2% in the third quarter, Russia is experiencing growing political pains that potentially could translate into economic weakness?

India has seen a sharp deceleration in industrial production to the tune of 5.1% in the most recent reporting period and China, the one country that we counted on since the great recession began is experiencing what appear to be the early stages of an economic slow down?

There is an often used saying with friends like this who needs enemies? With stats like these…..? My take on all of this is very simple; we as an emergent global society are about to find out, just how much interdependent we are come the New Year.

Afrophiles everywhere in general and Africans in particular beware all this might potentially mean some pretty bad things in 2012. Not too long ago the International Monetary Fund forecasted that 7 of the 10 fastest growing economies in the world in 2012 will be in Africa.

Despite being labeled as the hopeless continent by the Economist in 2000 (Or perhaps inspite of it, LOL), Africa’s GDP as a whole has averaged 5.5% growth for the better part of a decade. This has meant good things for many African countries. A trend we all hope continues.

Go no further than Accra, Dakar, Nairobi and/or Dar es Salaam and you certainly feel something different, why it reminds of me that oh so passé saying ‘Be the Change’ because that’s literally what’s been happening, Africa has been the ‘change’.

Unfortunately, the positive ‘change’ that has underlined so much excitement about Africa may be about to change again and this time we might be heading for a period of extended turbulence.

China, whose rise in the past decade has much to do with Africa’s new found economic prominence appears to be experiencing the early stages of what could be a substantive economic slow down. Trade with Africa grew from $10 billion in 2000 to $124 billion in 2010. In November, China officially became Africa’s largest trading partner.

All that could ‘change’ though, with more recent economic forecasts in China projecting growth as low as between 7% and 8% next year from a peak of close to 9.5% in 2011. China’s demand for Africa’s minerals and natural resources has contributed greatly to Africa’s growth in the past ten years.

Even a small ‘change’ in Chinese trading patterns with Africa are likely to have a big effect on African countries. Then, there is the matter of the euro; Europe is Africa’s second largest trading partner, giving up pole position only recently. What happens in Europe in general but with the euro in particular threatens to further weaken African growth prospects in 2012.

Imagine the headache we would all have to endure if the euro was to suddenly implode. With the euro gone how do you revalue national currencies? What would be a natural starting point? Where do counterparty guarantees lie within the European financial system? All of this will likely impact European and African trade flows, with trade financing affected at least for a while?

African growth might be further damaged through policy in-action in America, as we are heading for a presidential election in 2012. With economic malaise prevalent in the U.S., and political bickering reaching new and stupendous heights there is little light in the American economic tunnel that could potentially serve as a source of growth for African countries.

In India growth is slowing quickly and Brazil is entering a possible recession and with Russia hanging out in the political periphery things could get quite ugly quickly. No wonder then that the Mayan’s called it?

All of this raises some interesting questions, such as what can the Africans do to insulate themselves? In the short term and in the worst case scenarios realistically there is little that can be done, however, in the medium to long term; there are many things Africans can do to reduce their dependence on external actors.

This might be the time to think about broadening and deepening intra-African trade and investment, after all we are talking about a market of approximately 900 million plus people. Currently, most African countries trade more with their old colonizers in Europe than they do between themselves.

There is a patch work of regional trading groups ranging from the Economic Community of West African States (ECOWAS) to the East African Community (EAC) through to the Southern African Development Community (SADC).

However, trade and investment relations between member countries within these groupings are often patchy at best and despite years of trying hard to make things work results have not been very good. Perhaps now is the time for policy-makers to consider what the consequences of their inactions might mean for their countries in the not too distant future?

The lack of trade between countries is also punctuated by the near absence of intra-African investments. For all of the growth that has taken place in Africa, you will still be hard pressed to identify African multinationals working across the continent. Yes of course there are some, but, the point is that they are barely visible; something I also think is ironic given that some of the best returns on investment globally are on projects in a multitude of sectors in Africa.

Perhaps its time for African governments to more forcefully represent themselves on the world stage in front of old powers such as America and Europe in general but the new ones in the form of the BRIC’s in particular?

For years African political disunity has allowed many countries to divide its polity with 54 nations representing a vast continent it might have been easy to do. But now as the world totters on the edge, perhaps, Africans might want to step up unite and let everyone know that they have a ‘say’ in their future too?

I sincerely hope the euro survives, China does not slow down, Brazil and India get-back on track and that Republicans and Democrats become friends again, I hope whatever happens that the gains that many African countries have made are preserved and even enhanced. Above all I hope that the Mayan’s got it wrong and that we, all of us get it right? Happy Holidays my dear friends see you all in 2012, I hope? (LOL).