RISING AFRICA, RISING RISKS

HOW SELF-SUFFICIENCY THROUGH A GREEN ECONOMY IS AFRICA’S ONLY HOPE FOR LONG-TERM GROWTH

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Africa Rising
This time last year the Financial Times' and The Economist’s joint “Africa Rising” campaign was in full swing. Over the first quarter of 2013 two of the world’s most influential newspapers, using every medium at their disposal*, confirmed that Africa is now the “Hopeful Continent” and that its “Moment” has truly arrived.

By February, enthusiasm had reached fever pitch, Afro-optimism was turning into Afro-euphoria and The Economist reported global investors were “salivating” at the prospects. By the end of the year the euphoria was given the ultimate justification when the FT published nine articles in December on international bankers getting “excited” about Africa as the last frontier for finance.

However, the combination of Afro-euphoria, salivating investors and excited bankers (with their tendency for “irrational exuberance”) should ring alarm bells for anyone interested in Africa’s long-term sustainable growth and development. It was no surprise therefore to read on 6 February 2014 an article by Gavin Jackson in the FT’s on-line publication beyondbrics: “Africa: getting riskier.”

Africa Risky
“Africa is looking increasingly risky for investors and global supply chains,” Jackson writes, referring to information in the latest Global Risks and Resilience Atlas (GRRA), published by UK-based global analysts Maplecroft on 6 February. Maplecroft’s highly respected annual GRRA evaluates 179 countries across 36 risk issues. It identifies 5 broadly interconnected risks in Africa: macroeconomic, security, climate change, resource scarcity and pandemics and infectious diseases. Risk resilience is identified by two indices: governance and societal.

Of the 21 countries worldwide that saw an increase in their exposure to risk during 2013, 15 are in Africa. Nearly a third of sub-Saharan countries saw rises in their levels of risk and deteriorating resilience. More than 75 per cent are now in the “high risk” category with South Sudan in the “extreme”, second only to Syria. Last October the UN warned of a “conveyor belt of instability” running across Africa from Mauritania to the Horn. The conveyor seems to be getting longer and is speeding up.

Factor in the effects of climate change, deforestation, soil erosion, resource depletion and biodiversity loss (most of these are twice the global average) plus the doubling of populations over the coming decades and today's risks, without a radical change of approach to economic growth, will seem insignificant. 

In addition to risks from insecurity, climate change and resource scarcity, Africa’s latest boom has thrown up macroeconomic risks and increased vulnerability to the global economy. African countries last year borrowed a record $8 billion on the capital markets, imports are surging and export earnings are extremely volatile. As a result the International Monetary Fund says there is increasing risk of current account deficits and fiscal imbalances throughout Africa. Ghana, West Africa’s 'rising star', in August 2013 became the first African country since the historic debt-relief in 2005 to pay back debt with more debt. Across Africa there is a growing sense of déjà vu.

The IMF has also warned of Africa’s over-reliance on foreign investors and its particular exposure to China, to US “tapering” and to international financial flows. Add to this Africa’s estimated losses of over US$50 billion a year in illicit financial flows (and rising), far more than the amount of official development assistance the continent receives, and Afro-euphoria is looking increasingly hard to justify. 

What is more worrying is that countries with high growth rates, like Nigeria and Mozambique, seem to be just as vulnerable to increased risk as the lesser economic performers like Central African Republic or Somalia. According to Maplecroft, Nigeria, Africa’s second largest economy and darling of international investors, has seen a big change in its rankings moving from the 22^nd most at risk to 14^th in the past year and is now in the high risk category.

Veteran Africa reporter Patrick Smith, in the March issue of The Africa Report, asks the critical question: “Why is it, when more investment is pouring into the continent than ever and the IMF has just upgraded its forecasts for African growth to an average of 6.2 per cent in 2014, that political violence is on the rise again in both outright civil wars and armed insurgencies?”

This gives an African dimension to a rising concern captured by Gideon Rachman in the FT on 27 January. In “Growth and globalisation cannot cure all the world’s ills,” Mr Rachman argues that the old prescriptions for solving problems – "more trade, more investment with a good dose of structural reform" - are no longer guaranteed to work. This has huge implications for Africa as it is now the fastest growing, the fastest globalising and yet still by far the world’s most vulnerable region.

So if growth and globalisation, as we know them, are not the answers to Africa’s ills and rising risks, what are? African leaders have two interconnected answers to this and have been trying to get the message across to the international community for years: self-sufficiency and a green economy.

The Dependency Model
African leaders first called for self-sufficiency, or self-reliance, at independence in the 1960s, not to reclaim it, as they are today, but to avoid losing what they already had. Their fears were justified. By the end of the 1980s, the planning, technologies and economics of the post-colonial development model (and the assumptions that underlie them) left Africa with billions of dollars’ worth of failed or failing projects, millions of destitute people and billions of dollars of debt. In single generation Africa’s self-sufficiency had been destroyed.

Standing in the wreckage of this dependency model in the early 1990s a new generation of African leaders called once more for self-sufficiency. Africa’s participation in the UN’s first Rio ‘Earth Summit’ in Brazil was the turning point in thinking about how this might be achieved. Sustainability was now the goal. New models for development, new concepts and new systems were being explored. Green technologies, green accounting and green thinking based on local knowledge and a multidisciplinary approach would enable Africans to reclaim self-sufficiency and economic independence.

But this was also the post-cold war era when globalisation was taking off. Over the following 20 years, while Africans were laying the foundations for self-sufficiency through a 21^st century green economy, the old system, or business-as-usual, remained the most dominant force on the continent and it was expanding fast. China’s ‘big push’ into Africa from around 2003 followed by other emerging economies, while bringing much needed investment, perpetuated the late 20^th century model of dependency. China has been called ‘the game changer’ in Africa but the game is just the same, only bigger, faster and more risky. For all the talk of “this time is different” in Africa, there is a lot that is not so different after all.

This was thrown into focus during the 2007-2008 global food crisis when Africans found themselves in a dependency situation more precarious than ever with mass hunger staring them in the face. A year later the Great Crash of 2008 emphasised Africa’s dangerous vulnerability to outside shocks. At an African Union crisis summit in January 2009 Meles Zenawi, late prime minister of Ethiopia, warned fellow Africans that “unless we act, and act now and decisively, the majority of African states could become failed or failing states over the coming decade.”

Africa and its international partners did act decisively and now five years later the continent is rising fast and is in a position to play a critical role in global affairs and become the new engine for global growth. However, as the latest Global Risk and Resilience Atlas suggests, there is no guarantee the engine will deliver the type and amount of growth that Africa and the global economy needs.

The Quest Continues
The good news is that despite the dominant role of the old dependency system, Africans haven’t given up their quest for self-sufficiency through a green economy. Since the dark days of the crisis Africans have been building on their green foundations and now have the knowledge and credentials to convince potential partners where sustainable investments lie. African countries need rapid and sustained investment in their green economies to counteract the expansion of the dependency system, which also happens to be high carbon, resource intensive, ecologically degrading and socially divisive. This old “brown” economy will not work in the world’s most challenging continent.

Africa leaders such as Meles Zenawi, Donald Kaberuka, President of the African Development Bank, and Kofi Annan, former UN secretary-general, have been calling for green growth as Africa’s only viable route towards economic transformation and self-sufficiency. Green Economy Initiatives - from the pan-African to local level - are proliferating across the continent. Green success stories are accumulating fast.

Last October the African Development Bank issued an inaugural $500 billion Green Bond which sold out within 24 hours and was 10 per cent oversubscribed. The AfDB, NEPAD, the UN, the World Bank, OECD and other global institutions plus innumerable NGOs, large and small, are taking first steps towards measuring Africa’s green economies so that they can be understood and expanded.

Since the 2008 crash both the FT and The Economist have shown how far green thinking about Africa has travelled. In August 2011, one month after South Sudan’s historic independence, The Economist published an article called “South Sudan: the new green”. This 21^st century view of Africa proposed that the country's unique pristine wilderness areas with little human footprint could act as "buffers between cattle-raiding groups - and brand the country as the green heart of Africa." On 20 June 2012, the opening day of the UN's Rio+20 Earth Summit, the FT explained in more detail how the new ideas might work with a Special Report: “Africa and the Green Economy”.

The African leaders' Consensus Statement to Rio+20 makes it clear that green growth is critical to Africa’s future. This overlooked document demonstrates that Africa’s self-sufficiency, resilience and sustainable growth is only possible through a 21^st century green economy. It also shows that Africans have been preparing the way ahead. 

With urgency mounting, Item 24 of the Consensus Statement calls on the international community “to put an international investment strategy in place to facilitate [Africa’s] transition towards a green economy." As world leaders, preoccupied as they are with multiple crises of their own, are unlikely to deliver a green investment strategy in time, this is a historic moment for Africans to propose their own. 

Globalisation on Trial
In the 1960s, departing Europeans said "the white man's civilisation is on trial in Africa." Well aware of the consequences of success or failure they could see that "the future of us all is bound up in Africa." Fifty years later it is globalisation that is on trial and an economic growth system that is wrecking the planet. As Africa is the last frontier for investment the future of us all is bound up there more than ever. In our interconnected world Africa's risks are now everybody's risks. 

The days when Africa’s dependency was to everyone else's advantage are over. The continent's return to self-sufficiency through a low carbon, resource efficient, ecologically responsible and socially inclusive green economy would benefit us all. Africa's advantage is that the brown economy is still underdeveloped. African leaders can and must do more to put the green economy into the Africa Rising narrative. More exposure from influential publications like the Economist and the Financial Times would help.   

* FT/Economist media include the article, analysis, editorial, comment, special report, summit, conference, meeting, interview, video and on-line debate.

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