COVID-19: Africa's Glass Half-full


Friday, October 22, 2021 / 11:50 AM / FBNQuest Research/ Header Image Credit: iStock

As the global economy emerges from the carnage in the year of COVID-19, there are signs of a return to near normality in the form of investment flows. Global FDI has bounced back to USD800bn in 9M '21 and should top USD1trn in the full year. Meanwhile, venture capital flows into Africa in H1 '21 were double the year-earlier period and could well reach a record USD3bn over the 12 months. Four economies see an estimated 80% of the investment (Egypt, Kenya, Nigeria and South Africa).

The data and forecasts were shared at "Africa Connected", a one-day conference hosted in London yesterday by Hogan Lovells, a prominent international law firm with an extensive African network. In the closing address Donald Kaberuka, the previous president of the African Development Bank, sounded a note of caution around the global landscape. The international response to the pandemic has been poor in his view, when compared with the response to the global financial crisis: indeed the rollout of vaccine programmes and access to vaccines has been asymmetric, such that the steady convergence of most economies in the world since the 1990s has suffered a setback. In short, globalization has been the loser.

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At the same time, Kaberuka identified some grounds for Afro-optimism. He was impressed by the early output from both the African Continental Free Trade Area (AfCFTA) and the Addis-based Africa Centres for Disease Control, notably the steps towards the first vaccine production on the continent.

A lively panel discussion produced several other reasons to be hopeful. Yofi Grant, the CEO of the Ghana Investment Promotion Centre, told the audience that Africa had 90% of the world's reserves of cobalt and platinum, 50% of its gold and 35% of its uranium. It also has substantial reserves of lithium and coltan, two minerals currently much in demand. Africa could theoretically feed the world, he added, given that it has more than half of the remaining uncultivated arable land.

Grant's parting shot was that Africa must have some strong positives for investors because otherwise companies such as Unilever and Standard Chartered Bank would not have stayed put for more than a century.

Slim Feriani, a former industry and energy minister in Tunisia, drew attention to the emergence of large African corporates with south-south and international aspirations, already realized in some cases. These include Morocco's Attijariwafa Bank and Tanger Med, a logistics agency which has helped to transform the economy and not just the automotives sector, Kenya's Safaricom and Ethiopian Airlines. We could add several Nigerian firms to the list.

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Edem Adzogenu, the co-chair of Afrochampions, pointed to some low-hanging fruit favouring Africa, notably the combination of its youth and digitalization.

Gordon Welsh of UK Export Finance (once known as ECGD) did a good job in managing expectations. While there is no shortage of funds for a bankable project in his view, he recalled talks with the PPP unit of one African finance ministry. No fewer than 27 projects were suggested by the officials but not one has secured UK government backing. A common theme was the absence of a reliable stream of underlying revenue.

Panellists noted the decades taken to achieve what passes uncritically for European integration.

This conference had an underlying theme of 'whither Africa?' We have attended more such events than we care to remember over many years yet value yesterday's for the selection of speakers (not the usual faces) and their grounded optimism.

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