A Bright Future Awaits the Last Frontier for Investment

The proposition that the best thing that could happen to Mauritius is the emergence of a prosperous Africa is now more than ever within reach

25th May: Africa Day

The annual celebration of Africa Day marks the anniversary of the birth of the Organization of African Unity at a meeting held in Addis Ababa in May 1963. The OAU was founded with an initially limited objective of supporting and facilitating the liberation struggles being fought in Angola and Mozambique as well as against the despicable apartheid and racist regimes in South Africa and what was then Southern Rhodesia.

In fact the first congress of African independent states was held in Accra, Ghana in 1958 and was convened by Dr Kwame Nkrumah who was by then an iconic figure of the African liberation struggle. The conference showcased the progress of the liberation movements on the continent and the participants vowed to support the liberation movements which were still struggling to rid their peoples of the yoke of colonialism and exploitation. This was the first time that such a conference was being held on African soil and it called for the founding of an African Freedom Dayn- “to mark each year the onward progress of the liberation movement and to symbolize the determination of the people of Africa to free themselves from foreign domination and exploitation.”

Five years later, in 1963, the Organization of African Union was born in the presence of representatives of thirty odd independent nations hosted in Addis Ababa by Emperor Haile Selassie. On 26th of May a Charter was signed by all attendees (except Morocco) and the proposed Africa Freedom Day was renamed Africa Liberation Day to be celebrated on the 25th of May of each year. When the OAU was replaced by the African Union – to reflect the new wider mission of the organization – with due respect to the formation of the OAU, the 25th of May was kept as the day to celebrate Africa Day.

Economic Progress: Africa at the Tipping Point

“What the hell is happening in Africa?” asked the famous African businessman and philanthropist Mo Ibrahim at the start of a recent conference in Marrakech. He was referring to the volatile situation in Africa which after having witnessed almost a decade of continuous robust growth had borne the brunt of the consequences of the 2008 Great Financial Crisis. The subsequent stagnation in the global economy resulting in a fall in demand for and slump in price of raw materials and oil was severely impacting the rate of growth in so many of the African nations which still depended on exports of primary products for their economic prosperity. This sequence of events had put an end to a cycle of solid growth of nearly 6% over almost a decade.

Now the sudden spike in the price of oil due to geo-political circumstances rather than economic fundamentals should again bring about a substantial improvement in aggregate macro-economic growth on the continent. This aggregate growth hides different realities in different countries of the continent; the larger number of countries remains net importers of oil and will therefore be negatively impacted.

For the above reasons (impact of global economic volatility and differential conditions in each country) when assessing the economic landscape in Africa it is therefore necessary to look beyond the prevailing circumstances and address the more fundamental trends as well as the characteristics of each country. Charles Soludo, former governor of the Central Bank of Nigeria summed it up when he stated: “When we talk of Africa, which Africa do we mean? Africa is just a geographical construct. We have to deconstruct discussions and look at individual nations and their regions…” And here there is reason to be optimistic.

Writing in 1999 professors Paul Collier and Jan Willem Gunning stated that “Africa is a capital-hostile region” and gave four reasons which caused this sorry state of affairs: lack of openness to trade, a high-risk environment, a low level of social capital and poor infrastructure.

Whatever views one may have about the consequences of globalization and the free trade regime imposed by World Trade Organization over nearly three decades, there is no doubt that these have contributed to huge progress in trade openness in Africa – tariffs are down everywhere and interestingly enough intra-African trade is on the rise albeit less than one would have expected. The recent signing of the African backed continental Free Trade Agreement is a huge step in the right direction and will eventually provide a platform for substantial opportunities for economic growth.

As regards the high risk environment, there is no doubt that there is some way to go yet before the continent is viewed as a “safe” investment jurisdiction but again one needs to be careful about the distinction to be made between national jurisdictions. On the count of “high risk” one may again quote Mo Ibrahim who often likes to say “how many companies have been nationalized in Africa in the past 25 years”?

Finally with regard to infrastructure Donald Kabureka, a former African Development Bank (AfDB) president states that, in the 10 years that he has been there, the Bank alone has contributed $ 28 Billion for infrastructure financing including airports, ports and roads and communications development.

Add to this the undeniable fact that in numerous countries democratic institutions are being put in place and an economic middle class is emerging as a force to be reckoned with.

It is against the above background that Mauritius has to craft a credible Africa strategy. The proposition that the best thing that could happen to Mauritius is the emergence of a prosperous Africa is now more than ever within reach.

* Published in print edition on 25 May 2018