Africa 2015

By Asoka Ranaweera

The writer is a managing partner of a company that advises investors on structuring investments and developing projects in West, East and Central Africa.

We are now depending of course on how you measure it, entering the 15th year of what more recently has been termed 'Africa rising'. 

The narrative that the continent is in its ascendency has like many things these days been branded into catchy phrases. 

How else is it possible to catch the public's attention in a fast paced world where headlines move in nano seconds.

Catchy marketing terms apart what's been happening in Africa is very serious. 

The continent has grown in leaps and bounds, politics has matured and there is a growing confidence especially amongst the younger population that there is hope in the future. 

Living standards have improved, people are living longer, and many segments of the population are finally been taken seriously as genuine consumers by companies long absent from Africa.  

Meanwhile the new year around the world has arrived with a dull thud. Suddenly 2015 doesn't look so rosy. In fact its increasingly looking more like a very bad hang over. 

Europe's economic recovery is in severe doubt, Russia and Ukraine edge closer to the brink, China's economy registered its worst performance since 1989 and international terrorism is on a tear. 

Japan isn't doing well either and Asian economic growth is slowing. 

The only bright spot it seems is the United States, though some would question the durability or the sustainability of the post financial crisis recovery here. 

So what does all this mean for Africa rising in '2015'?

The short answer of course is that it means a lot.  

From around 1999 through 2014 China's economic growth had a profound impact on African economies. China imported commodities ranging from oil to zinc from Africa helping drive continental growth.

As exports from Africa to China boomed so did the relationship between African governments and China.

By 2013 China was lending more money to African governments than traditional institutions like the World Bank. And China was also investing in the continent on a scale not seen before. 

There is no doubt that Africa's and China's growing trade and investment relationship is likely to be affected by China's slowing growth. 

Not only is China likely to import less of what Africa produces it's also likely to provide less loans and reduce its investments in Africa. 

Meanwhile, Europe still a significant trade and investment partner for many African countries, particularly Francophone Africa, is experiencing a prolonged period of disinflation.

The French economy continues to stagnate and as does most of Europe's. And this lack of growth will affect demand for African commodities. 

The outlooks is not much better with countries that more recently engaged with Africa such as Brazil, Russia, India and Turkey, most of whom are experiencing their own internal challenges.

In more recent years spurned on by China's ever expanding presence in Africa, the U.S. has begun to get more involved on the continent. 

For as much as the U.S. is being seen the sole remaining engine of global growth this in itself may not necessarily be of comfort to Africans. 

In fact the U.S. has begun to compete in markets such as oil and gas and as we all know today is the number one oil and gas producer in the world.

The result is quite astounding, for the first time since the 1970s not a single barrel of oil was imported from Nigeria by the U.S. beginning in the second half of 2014.

With complex head winds in play Africa faces a year of challenges that will test the proposition that 'Africa is rising'. 

For the past several years carefully managed macro-economic policies by central bankers and finance ministries from Nigeria to Tanzania have been praised for creating an enabling environment for growth. 

However, these policies worked well when economic growth was on an upward trajectory it's less clear how well they will work when countries will be impacted as growth begins to falter. 

We only have to look at Nigeria which is beginning to be challenged by falling demand for its primary export which is oil and the effect this and other factors are having on its currency the Naira.

Similarly, a slow burning crisis in Ghana last year threatened to go out of control and is still being contained with the assistance of multilaterals such as the IMF.  

In fact if you look at west, central, eastern and southern Africa there are signs of problems emerging pretty much everywhere. From stagnating growth to increasingly higher inflation.  

All of this should trouble Afrophiles like me, however, I see what's about to happen as a challenge that Africa has to live up to in order to show the world that what's happening on the continent is sustainable.

In the good times you can do many things but in the bad times leaders and policy makers will be limited by constraints placed on them by slowing economies.

And the challenge will be to find a formula that incorporates indigenous needs focused on creating a more durable social infrastructure such as education and healthcare systems that can support growth.

These need to be combined with rapidly expanding physical infrastructure on the continent such as power, roads, private and public real estate to make Africa more competitive globally.

One area to concentrate on is to see how far African countries can take up the slack as Chinese labor costs rise rapidly making basic manufactured products uncompetitive.

Another is to evaluate ways in which Africa can be integrated into the global digital economy. Let us not forget that the internet as we know it is still not accessible to a large portion of Africans.

These are simple points but they have profound implications because it's important over the long term to prepare young Africans to compete in a world where ideas and not commodities predominate.

In fact if anything any slowdown that African economies are about to experience should be seen as an opportunity to wean the continent's off its decades long dependence on commodities exports.

Commodities will not last forever, few countries in modern times developed by relying on commodities exports alone. In fact those that succeeded depend heavily on the power of its people.

Let's look no further than China in the case of a country with a huge number of people or maybe just at Singapore a country with a small number of people but which at independence had no resources.

2015 will be a year of profound challenges in Africa but in this period of tumult lies an opportunity to establish a more durable and sustainable path to development focused on its core asset, its people.