Africa 2016

By Asoka Ranaweera

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

Foreword & Farewell

It's been an honor and a privilege to write this blog for so many years. As I write my last posting I reflect with fond memories of the encouragement I received from so many readers.

It still amazes me that the blog has generated tens of thousands of visitors from all corners of the world. It's a testament to the interest that so many people have in Africa.

The last three years in particular has seen exceptional readership not just of my new postings but  the old ones too, which means that people are hungry for news on Africa.

Finally, it may interest you to know which stories were the most popular based on unique visits to the blog, the top five stories were:

1) The Poverty of Ebola, 9/29/2014

2) How China Changed Africa,  9/12/2011

A only a few visits separated the top two posts

3) Africa 2015, 1/30/2015

4) Africa 2012, 12/14/2011

5) Why the U.S should Emulate China in Africa, 2/8/2011

Thank you all for all of the great memories and I will be back with something new to offer soon.

Asoka Ranaweera

Africa 2016     

As 2015 draws to a close, it's time to look at what might be the defining themes for Africa in the New Year.

Of course there is so much going on continent wide across 54 countries and societies and it's difficult to prioritize issues of importance to everyone's liking.

But let's try by focusing on some broad themes that will impact the continent in 2016.

El Nino & La Nina

Climate change and the weather are two topical issues of the moment coming hot on the heels of COP21 in Paris.

The El Nino that started earlier in the spring of 2015 is the strongest one since records were established in 1950.

During El Nino years the weather in West Africa tends to be dryer than normal.

This matters a lot since 70% of the world's cocoa beans used in chocolate originate in Ivory Coast and Ghana. And by the way Nigeria is currently the world's fourth largest producer.

Main crop or the main harvest season began in September with some regions in Ivory Coast and Ghana experiencing less rain than normal.

The bulk of El Nino's impact though is likely to be felt during mid crop or the lesser harvest which comes later on in 2016.

Less cocoa means less volumes means that farmers livelihoods will be impacted as will the GDP's of Ivory Coast, Ghana and Nigeria the three main producers of the bean in West Africa.

Millions of small holder farmers will be exposed to the vagaries of El Nino.

Ghana's output has been projected as low as 700,000 tons for this season which is a far cry from records set several years ago when well over 900,000 tons was harvested.

Ghana and Nigeria in particular are two countries whose economies have struggled in 2015.

El Nino will cause further trouble in 2016 at a time when the price of commodities exports in general have started to hit record lows.

And El Nino's effects may also show up in Ghana's presidential election scheduled for December 2016 as wide spread dissatisfaction with the ruling party intensifies as the economy falters.  

Paradoxically, weather forecasters are predicting that by spring 2016 El Nino will give way to a very strong La Nina which will have the opposite effect bringing more rains than normal to West Africa.

Although La Nina is not forecasted as a certain outcome - more rains are not necessarily a good thing in agriculture in that it causes poor harvests due to flooding, crops rotting because they cannot be harvested and stored.

In Eastern and Southern Africa El Nino's effect could potentially be more sinister.

In Uganda rains have disrupted normal harvests delaying agricultural output and having a severe impact on livelihoods.

Ethiopia has experienced dryer than normal weather and as a result up to 8.2 million people may be at risk of famine.

In fact Ethiopia has not seen a drought of this magnitude in several decades causing UNICEF to warn that already 350,000 children have been affected by malnutrition.

Further to the south, Malawi and Zimbabwe have also been severely impacted by El Nino.

In Zimbabwe alone up to 1.5 million people may be impacted by March of 2016.

Finally South Africa has also experienced extensive crop failure in 2015 due to prolonged drought a situation which is likely to persist well into 2016. 

Corruption

President Muhammadu Buhari was elected in part on a strong anti corruption mandate to lead Nigeria, Africa' largest economy.

Under President Goodluck Jonathan Nigerian's endured ever more levels of unbridled corruption which reached new heights.

Nigerian's already greatly cynical about their ruling political elites were in many instances shocked by how much more was stolen by so few entrusted with steering the development of the country.

Just as Nigeria's political transition was important for Africa in that it represented the first transfer of power between civilian governments in Africa's largest country and economy, the battle for corruption becomes pivotal in setting the foundations for the rule of law in Nigeria which could serve as an example to the rest of Africa.

Already President Buhari has gone after some members of the former administration but the problem is systemic.

How will he handle the challenge of changing a political system that is corrupt to its core?

Anyone who claims that they have an answer would deserve a noble prize.

This is an issue that is integral to the president's credibility and it will be a defining theme for Nigeria and most likely Africa in 2016. 

Politics

Speaking of elections and the rule of law, there are going to be some interesting ones in 2016 with implications for the rest of the continent.

Let's begin with the Democratic Republic of Congo (DRC) where the incumbent Joseph Kabila has been in power since 2001.

Although constitutionally barred from running for a third term will he actually be allowed to run? And if so, will he run?

If he does run he sets a bad precedent not just for the DRC but for the wider region as a whole where incumbents simply do not want to let go.

If he does run and he is challenged by the highly regarded Governor of Katanga province Moise Katumbi formerly a member of Kabila's political party what will be the result?

This is an important question not just for the DRC but also for all of its 9 neighbors.

The DRC a vast country, is in transition from a devastating series of conflicts and is often referred to as the heart beat of Africa.

Speaking of neighbors, Yoweri Museveni who came to power through a coup in 1985 and who introduced multi party democracy to Uganda in 2005 will face off in what is likely to be a close election race.

Much like Tanzania which this year saw a huge challenge to the ruling CCM the election in Ugandan is likely to be close.

Museveni was once considered a bright reformer who urged African leaders not to over stay their welcome. What will happen if he loses? Will he go peacefully? Will he set an example?

Meanwhile back across in West Africa in Ghana presidential elections are due in December, 2016.

Although the election is expected to be contested between the National Democratic Congress (NDC) and the New Patriotic Party (NPP) there is a third party called the Convention People's Party (CPP).

The CPP is chaired by a Ms. Samia Nkrumah the 55 year old daughter of Ghana's independence leader Kwame Nkrumah an African legend.

Two things stand out, first of all Ms. Nkrumah is a women, in a continent devoid of women leaders.

Secondly, her relative youth at 55 years. African politics has primarily been dominated by older men, where age, hierarchy and experience has been prized.

Can a young women upset the political establishment in Ghana and become the leader of the country at a time of economic turmoil and thus set an example to the rest of the continent?

In fact in Africa there have only been 7 women heads of state most of whom were not elected and served in an interim capacity.

Ellen Johnson Sirleaf Liberia's president became the first woman elected as a head of state in Africa in 2005.

Macro Economy

As the year comes to an end commodities prices continue to fall and by all estimates are most likely to continue to fall further well into 2016.

This includes but is not limited to prices for oil, gas and copper primary African exports.

The fact is that China the single factor that drove so much of the global commodities market between 2000 and 2015 is suffering an economic slowdown which is intensifying.

China's demand for African commodities was pivotal in creating the foundation for what has been termed 'Africa rising'.

Nigeria, Ghana, Gabon, Angola and the DRC amongst others are large exporters of commodities which are being severely affected.

Aspiring commodities exporters such as Tanzania and Mozambique which have great hopes for developing vast offshore gas reserves and their economies are going to be impacted as well.

On a global basis oil and gas and mining budgets are being cut across the board as demand overall continues to contract not just because of China, but also because of the slowdown in Asia and Europe too.

Nearly all major commodities exporters who relied heavily on exports to support their budgets such as Nigeria will be challenged severely to keep governments functioning.

A key test of investor commitment to the commodities sector in Africa will come when Anadarko Petroleum of the U.S., will make its decision on a budget for the development of Mozambique's vast Rovuma gas Basin in March.

And with interest rates having already risen in the U.S. and with more rate rises to come in 2016 the overall pain could get much worse as portfolio and investment flows are expected to reverse course and head towards America.

This trend has already been observed across all emerging and emergent markets in 2015 in anticipation of the rate hike that took place in America just a few days ago.

Almost certainly some countries will have to seek assistance from the International Monetary Fund (IMF) for budgetary support.

Meanwhile the World Bank Group which was more recently sidelined by Chinese engagement in Africa will probably play a greater role in the continent's development agenda in 2016.

A Time for Change?

As challenging as the macro economic situation maybe it also offers many countries in Africa the opportunity to finally move away from their dependence on mineral and natural resources.

It should lead to identifying strategies to take advantage of Africa's real assets which are its people. 

And in particular its young people who are on aggregate the youngest people on earth.

While 'Africa rising 0.1' will be tested, the next phase of 'African rising 0.2' will come from the hearts and minds of its young enterprising and aspiring populations.

It is here that the battle of Africa's future development will be won or lost, it is where African governments and all interested stake holders should devote their greatest resources.

The end goal should be to create an enabling environment for people to grow, fulfill their ambitions and prosper.

The old approach based on minerals and natural resources simply did not work, it was wasteful and corrupt, it enriched a few at the expense of the many.

This is why we should be vigilant about El Nino and La Nina, so that we can help safeguard agricultural incomes and lives in West, East and Southern Africa.

It is why we should be cheering for President Buhari to succeed.

It is also why we would want to see peaceful political transitions in the DRC and Uganda.

And importantly why we would want Ms. Samia Nkrumah's star to shine bright even if she does not win the election in Ghana.

It's because we want to Africa to rise even further despite all of the challenges that 2016 will bring so that it's young people can establish a solid foundation for the future.