(Financial Times) The timing of Monday’s UK-Africa summit is very opportune. Economic reform stories, whether Egypt in the north of Africa, Ghana in the west, Ethiopia in the east or Angola further south are all bearing fruit, each taking turns to run through and complete their IMF-backed loan programmes.
Higher global liquidity, provided courtesy of G7 central banks, and a partial recovery of commodity prices have definitely helped most of Africa. But, without the current phase of fundamental reform, African bonds would never have been able to outperform EM regional peers by as much as they have since early 2016. The same holds true for the record issuance of foreign currency bonds by African sovereigns in 2018 and 2019.
However, much remains to be done and the fruits of success need to be enabled and felt across the whole continent to make the reform process sustainable.
Southern Africa, for example, is at a delicate crossroads. Zimbabwe is attempting to pull itself out of an economic abyss without any international financial support. Zambia is still in a process of self-discovery with regard to requesting IMF support, while a number of peers in the region are in need of political reform before economic recovery can take hold. The region’s largest economy, South Africa, is exiting two years of sub-1 per cent growth rates, while dealing with some of the highest youth unemployment and income inequality rates in the world. The subsequent reaction to migration from neighbouring countries just highlights some of the risks of economic deprivation.
Indeed, the extreme droughts in the area have left both Zambia and Zimbabwe with close to no hydroelectric power production, and more than half of the latter’s population facing the extreme situation of “food insecurity”, according to the UN World Food Programme. The lack of access to foreign exchange just exacerbates the situation.
While there has been an increase of FDI flows into Africa as a whole and the continent’s population is double that of Latin America, Unctad data show that Africa still only receives around a third of the volume of foreign direct investment that Latin America sees every year.
This disparity can eventually be reduced by including a wider set of African countries in the international discourse. The UK-Africa Summit is clearly a start but those countries not present will continue to be notable for their absence on the international stage. Let this be a discourse to empower reform and inclusion of those countries.
Article by Simon Quijano-Evans, originally published in The Financial Times.
Del Jones / Carl Leijonhufvud Headland ConsultancyCall +44 (0) 20 3805 4822