RISING AFRICA, RISING RISKS

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

NOTE: Any article from the Financial Times or The Economist referred to here to can be accessed for free by following the links.

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.

Related posts: Davos, derisking Africa and the green economy

BRITISH AID CAN BOOST AFRICA'S GREEN GROWTH

The Financial Times articles mentioned below can be accessed for free by following the links.

On 28 January 2014 the FT published an article by chief foreign affairs correspondent Gideon Rachman entitled “Growth and globalisation cannot cure all the world’s ills”. With this article Mr Rachman questions the accepted trouble-shooting prescriptions that have been used by policy makers for the past twenty years.

YaleGlobal online, a publication of the MacMillan Center, gives a good summary of the article:

“Global leaders and elites, such as those who gathered for the World Economic Forum in Davos, regard economic growth via globalization as the prescription for difficulty or political conflict, suggests Gideon Rachman for the Financial Times. But economic growth, globalization and capitalism do not necessarily curtail inequality, instability, environmental degradation, nationalist rivalries, jihad and the other stubborn quests for power that ignore democratic decision-making. Rachman identifies three areas of the concern: Syria and other places in the Middle East are beyond the fixes of economic rationality. The Chinese-Japanese rivalry intensifies despite the fact that China is “Japan’s largest trading partner and the biggest recipient of Japanese foreign investment” and Rachman points out that “in some respects, China’s growing prosperity is actually driving the increase in international tensions in Asia.” And in Europe and the United States, globalization has enriched many but contributes to wage stagnation and a widening inequality that could lead to more political extremism.” 

            What a coincidence that Gideon Rachman should write on the same day as the FT’s Africa Editor, Javier Blas, reports “UK shifts African aid focus to economic development” with its emphasis on growth.

Mr Rachman’s insights are particularly relevant for African aid because, despite being the world’s fastest growing region (by some accounts) and globalising at a dizzying pace, the benefits are by no means curing the continent of its many political, social and environmental ills, and in many respects are making them worse.

Mr Rachman’s well-argued Comment should therefore act as a signal to Justine Greening, head of the UK’s Department for International Development (DFID) , to make sure that investments that boost growth are sustainable and inclusive. In the current system this is easier said than done. Economic growth, measured by gross domestic product, has the tendency to have the opposite effect. The only known solution to this conundrum is through investments designed to boost green growth measured by green GDP, a 21st century accounting system not yet recognised in Africa or elsewhere.  

If, as Ms Greening says, DFID’s departure in the way the UK spends its aid budget is “radical”, “revolutionary” and yet “pragmatic”, this is a unique opportunity for her department to live up to those words and direct aid towards Africa’s emerging green economies instead of towards business-as-usual.

Britain has many advantages for supporting green growth in Africa including historical connections, unrivalled knowledge of the continent, leadership in green technologies and a deputy prime minister, Nick Clegg, who championed the green economy at the UN’s Rio+20 Earth Summit in 2012.

2013 was the year of “Africa Rising”. With Britain's, and more specifically DFID’s, influence 2014 can be the year of Africa’s Rising Green Economy.

Related posts:

Africa's Green Voice Falls Silent: 2013 London Memorial to Meles Zenawi (30/06/13)

Britain's Role in Unlocking Africa's Green Economy (16/05/13)

A Letter to the FT: Europe's Role in Unlocking Africa's Green Economy (09/03/12)

BOB DIAMOND IN CASINO AFRICA?

AFRICAN REGULATORS BEWARE

Between 7 and 18 December 2013 the Financial Times published no less than nine news pieces on Bob Diamond's return to banking, this time in Africa. The infamous Mr Diamond resigned as chief executive of Barclays Bank on July 3, 2012, following controversy over manipulation of Libor interest rates by traders employed by the bank. He is now planning his comeback among the 'unbanked' and very vulnerable people of Africa.

This alarming piece of news that a discredited 'master of the universe' might begin gambling with Africa's new-found wealth prompted me to write a letter to the FT on 18 December. This letter was not published. (For a list of published letters click here)

Note: Although the FT site is open to subscribers only the paper allows 8 free articles a month per e-mail address. Just click on the relevant link and follow the procedure.  

Sir,

The news that bankers are becoming “excited” about Africa, particularly Bob Diamond who was at the heart of the Libor scandal and resigned from Barclays as a result, should ring alarm bells for anyone interested in long-term, sustainable development on the world’s last frontier for investment - "Africa offers growth potential on a vast scale" (Dec 15).

From the arrival of the Arab and European slavers 600 years ago right up to the “land grabbers” of today, Africa has been held back by unscrupulous opportunists only interested in the single bottom line where social and environmental costs are not included in the business model. If Mr Diamond’s comeback centres on buying a Nigerian bank, “Bob Diamond’s Africa fund Atlas Mara raises $325m” (Dec 17), that country’s regulators had better have their wits about them.

If Mr Diamond, once dubbed “the unacceptable face of banking”, has had a conversion and can see beyond short-term (and dubious) profits for himself and his investors, his involvement in Africa is great news. If not, and he gets up to his old tricks, his arrival spells disaster.

Africa is set to add trillions of dollars to the global economy over the next decade. The key to sustainable growth lies with honest and open bankers. So come on, Bob, surprise us. You could go down in history as "the acceptable face of banking in Africa".

END OF LETTER

MEASURING AFRICA'S GREEN ECONOMIES IS ESSENTIAL FOR LONG-TERM GROWTH

GREEN STATISTICS FOR AFRICA

In February 2013 Morten Jerven, Associate Professor at Simon Fraser University, Vancouver, published a book "Poor Numbers: How We Are Misled by African Development Statistics and What To Do About It". On February 25 the Financial Times reviewed the book "Consequences of a continent’s miscalculations". Essentially, the book and the review highlight the errors in African development statistics and call for more accuracy so that policy makers, investors and the general public have a better idea of what is going on.

The most famous and most extreme example of this occurred in 2010 when Ghana recalculated its gross domestic product and added 60 per cent ($13 billion) literally overnight.

In response to the FT review I wrote a letter to the paper saying that content is just as important as accuracy and that statistical methods currently in use in Africa, largely inherited at independence, are inadequate for understanding the world’s most challenging continent. This letter was published on March 3 as "Investors need fresh models of African growth". On 4 April I used this letter as the basis of a blog post under the title Salivating Investors Beware.

On October 23 the FT’s new Africa Editor, Javier Blas, revived the issue with an article, “Africa economic data: investors fear numbers fail to add up”. This was followed on October 28 by an FT Editorial “Africa at Dawn”. The main message of the Editorial was that "showering" African government statistics agencies with resources would pay off in the long run by "putting investors in the picture". While these two pieces reinforce the need for statistical accuracy, neither mention the need for new statistics designed for the 21^st century. For this reason I wrote another letter to the paper entitled “Green statistics for Africa”. This letter was not published. 

NOTE: For an overview of letters published click here. Although the FT website is open to subscribers only the paper allows 8 free articles per month per e-mail address. Just click follow the link and sign up.

LETTER 

Sir,

As the Africa Rising narrative unfolds, your report "Africa economic data: investors fear numbers fail to add up" (Oct 23)  and Editorial “Africa at dawn” (Oct 28) are timely reminders that accurate statistics that “put investors in the picture” are crucial if the continent is to maintain its attraction as an investment destination and continue its rise.

If, as you imply, “showering” African government statistics agencies with resources would produce reliable economic data, create confidence and “could deliver a surprisingly large return, lowering capital costs and attracting foreign investment”, there is no time to lose in accelerating the process. Getting a clearer and more accurate picture of the world’s most promising but most challenging continent would help smooth the road ahead.

However, in addition to showering resources on the conventional statistics introduced into Africa over the past 50 years, such as balance of payments (as you suggest), they should also be showered on a new set of statistics developed for the 21^st century, a set of 'green' statistics that will help measure levels of sustainability. If Africa is to cope with the challenges of the coming decades, seize the opportunities and, as many hope, pioneer green growth, accurate green statistics are crucial. Fortunately, Africans are now well qualified to produce them.

In the past 20 years, since the failure of the post-colonial development model, Africans have been laying the foundations for a green economy through their long-term sustainable development programs. Across Africa there is now a vast network of little-known green initiatives and success stories - public, private and combined. In the 5 years since the financial crash African leaders, championed by the African Development Bank, have been calling for green investors to support the transition to the green economy. A welcome boost to Africa's green economy took place on 10 October when AfDB launched a triple-A-rated $500 million Inaugural Green Bond that was 10 per cent over-subscribed.

From Morocco to Mozambique, Ethiopia to Senegal, Africa is turning green, yet despite these advances the green economy has not yet entered mainstream reports and discussions on Africa’s growth story. In this year’s record number of Africa summits and conferences the green economy hardly gets a mention and Africa’s green statistics are nowhere to be seen. As Afro-optimism turns to Afro-euphoria, without information on sustainability investors in a hurry who are not "in the picture" might find their returns short-lived.

As the sponsors of next year’s Africa meetings plan their agendas and invite their speakers, the time is ripe for introducing the green economy as an essential topic, starting with accurate and meaningful green statistics. Although they may uncover some "inconvenient truths" they will also reveal many that are very convenient. Africa's green economies, when measured, may be larger than we can imagine.

END OF LETTER

THE GREAT AFRICAN DISCONNECT OF 2013

GREEN VOICES SILENT AT AFRICA MEETINGS

“We know what to do: why don’t we do it?” – Wangari Maathai, 1940-2011, Nobel Peace Prize winner 2004

At the beginning of this year when I began to notice that most Africa summits and conferences being held around the world did not include green growth or the green economy in their agendas I started a campaign to put the green economy into Africa's growth story.  The more I looked into this the more concerned I became that another year of high level meetings would come and go without a single mention of the green economy in Africa. The blog post, Call for Discussion on the Green Economy in Africa, was a direct appeal to all those involved in events that will have a considerable impact on Africa's future. As next year's summits are now being announced, the green economy is still absent despite the fact that African leaders are pushing hard for green investment. The 'brown' economy, or business-as-usual,  is expanding fast in Africa and its familiar hidden social, environmental and long-term economic costs are rising rapidly. This is the reason for this post.

Teach your son how to use a gun
The word “great” has been used a lot since the 2008 “great crash” of the global economy. There is the “great recession”, the “great rebalancing”, the “great convergence”, the “great rotation”, the "great transition" etc. all requiring a “great rethinking” of just about everything we do. All of this shows us that we are facing challenges of “great urgency”. 

There is also the “great disconnect” between our knowing how to meet the challenges of the 21^st century and not getting on with the job with the greatest speed.

As world leaders struggle to keep the current system going, stumbling from one crisis to the next, that same system is destroying the planet on multiple levels with consequences no one can imagine. The whole fantastic system, which has created great wealth and improved life for billions, is unfortunately built on diminishing returns. Trying to fixing our system is a Sysephusian task, like pushing a rock uphill knowing it will eventually roll back down and you have to start all over again.

In his book “10 billion” Stephen Emmott, the eminent Cambridge scientist, assesses the likely state of the planet when there are 10 billion people living in the current system. He sums up the situation in three words: “We are fucked”. But Professor Emmott ends his book with the even more alarming words of a young, rational and very bright scientist working in his lab. Asked if there was just one thing he had to do about the situation we face, what would it be?

His reply?

“Teach my son how to use a gun”

How are we to avoid such a reality?

So far, the crisis has not been wasted

The good news is that since the “great crash” in October 2008 a vast amount of work has been carried out and a vast amount of knowledge gained on a new model for inclusive, sustainable economic development using the green economy as an essential tool in the transition. Partnerships between global institutions such as the United Nations, World Bank, OECD and the Global Green Growth Institute are creating the knowledge platforms and organisational frameworks on which the green economy can take shape. The emerging economies, led by China, are pushing ahead with green agendas. Countless other global and local, public and private initiatives are building the green foundations. So far, in many areas the crisis has not been wasted.

Most informed people on the planet, in one way or another, would agree with Professor Emmott, though they might express it in different ways. Governments know the green economy is the only way forward. Five years ago the G20 worked together on a Global Green New Deal to “build an inclusive, green, and sustainable recovery.” At the Saint Petersburg Summit in September 2013 the G20 agreed that “Measures have to simultaneously ensure a transition to a ‘green economy’ and sustainable development with quality jobs.”

Now is the time to accelerate the process. The technologies for the transition are well advanced, the skills are there, the private sector is leading the way and green success stories are everywhere. Financial institutions are creating new instruments. Investors are sitting on trillions of dollars saying “where can I put my money?” Ten minutes googling “Green Economy” should be enough to convince him or her that this the growth story of the 21^st century.

So if governments, businesses and most individuals agree that something urgently needs to be done, and that some sort of 'green' economy is the only practical route towards sustainability, why isn't everyone involved? Why isn't everyone talking about it? Why is there this disconnect? Or, as the late Wangari Maathai, one of Africa’s great green explorers, used to say, “We know what to do: why don’t we do it?”

Two stories of Africa - brown and green

Perhaps the greatest disconnect is found in Africa’s growth story and how it is being told. Some are telling the 21^st century green growth story where sustainability is the central theme, and some are telling the 20^th century brown growth story where the issue is given very little space or none at all. The story that gets most most peoples' attention is the one that will decide Africa's future and the future of the planet.

Like Dr Maathai, many leading Africans over the past twenty years have been telling the green story by promoting sustainable growth through green development whose aim is to balance economic, environmental and social interests. In the five years since the great crash Africans have been telling the world that the green economy is a major pathway towards inclusive, sustainable and resilient African economies. A new chapter in Africa's green growth story started with the leaders' Consensus Statement to Rio+20 in June 2012 where they make it clear that green growth is critical and a green economy is their only option.

The 20^th century brown growth story on the other hand, the one that says nothing about hidden costs, is the one that is still being told by many of Africa's traditional western partners as well as by China and other emerging market economies pouring into Africa. It is also being told in most of this years’ record number of Africa summits and conferences.This year will see the greatest number of Afro-optimists gathering in venues around the world to talk about Africa’s great prospects. Yet, with few exceptions, the ‘green’ economy is absent from agendas. Many summits and conferences do not even mention sustainability.

This is the great African disconnect of 2013, and as next year’s events are being announced many look like they will be telling the same story. The disconnect will continue.

As an example, the Financial Times’ 5th  “Private Equity in Africa” Summit, taking place in London on October 16, is one of the most important Africa summits in this summit-filled this year, yet there is not a single mention of the green economy or even sustainability in the full-day agenda.

For the first time in a long and complex relationship with the private sector, which was mostly to Africa's disadvantage, Africans are finally opening their doors. This move is crucial, not only for Africa but for the global economy. Unless sustainability, and more specifically the green economy, is built into discussions and followed through with green growth plans any return on private equity investment in Africa risks being short-lived.

There are many hidden costs in the world’s most challenging continent that must be understood and factored in. Some are mounting fast. As the FT's Private Equity in Africa takes place, the UN is talking about a “conveyor belt of instability" from north-east Africa across to Mauritania in the west. Veteran Africa reporter Patrick Smith is warning that security crises threaten Africa’s economic success. The waves of Africans arriving on Europe's southern shores show that there are still many hopeless people in the Hopeful Continent. And as Africa analyst Richard Walker recently wrote, “Africa has crashed before and can crash again...and when it comes, if it comes, it will be very, very big.”

For the lack of discussion on sustainability and the green economy at the FT’s Private Equity summit I sent a Letter to the Editor on October 3 with the subject Private Equity, Africa and the Green Economy. This letter was not published. (for a list of letters published in the FT click here.)

Letter to the FT Editor, October 3.

Sir,

This letter is not in connection with any FT news item or related letter, but with an FT LIVE event recently advertised in these pages, “Private Equity in Africa Summit”, to be held in London on October 16. This is arguably one of the most important Africa events in this event-filled year, for as the website says, "against the backdrop of a slowing global economy and increasingly constrained development spending, the private sector is now recognised to lie at the heart of driving Africa's economic transformation." With the continent in greater demand than ever before, the FT’s 5^th Private Equity in Africa Summit is an historic moment for the private sector.

From the arrival of the European and Arab slavers 600 years ago up until the end of the colonial era, Africa did not have many fair deals with “the private sector”. At independence most private (colonial) assets were sequestered by the state and for forty years private enterprise was mistrusted and discouraged throughout most of the continent. Only in the past decade have Africans begun to have dealings again with private investors. The FT's forthcoming Summit is evidence of how far things have come.

While state-led investment in Africa has its serious shortcomings, Africa’s challenge with new private investors is to ensure that there is no return to business-as-usual where elite Africans and their foreign partners reap all the benefits while those marginalised grow in numbers and the environment is left in ruins. Unfortunately there is already evidence of this happening again all over Africa.

For the past five years African leaders have been calling for responsible partners to create growth which is inclusive, protects the environment, minimises resources and runs on low carbon fuels. They have made it clear that the green economy is the only viable path to achieve this. They have made it clear that the potential for green growth in Africa’s vast underdeveloped human, ecological and mineral resources is enormous. Ten minutes googling "Africa Green Economy" will take you into Africa’s green growth story which is clearly the story for responsible private investment.

What is amazing in this record year of Africa summits and conferences worldwide is that, with few exceptions, the green economy is totally absent. The FT's Summit comes nowhere near it. In the same way the Economist’s Africa Summit in February “Africa Unchained: the Next Generation”, while very inspiring did not touch on the green economy.

As next year will undoubtedly focus even more on Africa and even more events will be held, could there please be more discussion on Africa and the Green Economy. If this is “Africa’s Moment” this is the moment to discuss green investment in Africa in ways that could help rebalance the global economy from "Brown to Green".

Over the past five years the FT and its sister newspaper, The Economist, have arguably done more than any other (private sector) publications to explain how the green economy in Africa might work. Those planning next year’s events have an historic opportunity to put the green economy into Africa's remarkable growth story.

End of Letter

Next year's Africa summits
This year's Africa summits, conferences and meetings are demonstrating the great progress and great inroads being made on what was until recently known as “the forgotten continent”. But participants are not yet discussing the green economy as the one tool African leaders know is their only real hope for fulfilling their great potential, as well as for coping with the mounting challenges of the 21^st century. Landscapes degrading, resources depleting, biodiversity being lost at an alarming rate, climate changing, populations rising, youth unemployment in some places out of control. It is clear that only a green economy will work in Africa, one that accounts for the hidden costs of doing business on this fragile and often hostile continent.

As the planners, sponsors and organisers of next year’s Africa summits and conferences consider their agendas, this is the time to start telling Africa's green growth story. If Africa can become a green frontier and lead the world in green growth it might even prove Stephen Emmott wrong.

Last word
If anyone reading this is involved or knows anyone who is involved in any Africa meetings, this year or next, and is convinced of their importance for telling Africa's green growth story, please send them an email or forward the link. 

.     

TIME FOR AFRICANS TO MAKE GREEN GROWTH PLANS

The following is another version of a previous post, ‘Africa’s coming crash and how the green economy can prevent it’ (link). It is prompted by the currency crisis in the emerging economies which is likely to have a negative impact on Africa. It is based on a letter sent to the Financial Times on August 27 which was not published. (For a list of published letters on Africa and the Green Economy click here.)

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As the 21^st century progresses and the global economy lurches from one crisis to the next, one thing is clear: the time between crises is getting shorter. No sooner do we hear that America’s recovery is ‘on more solid ground’ and Europe is ‘turning a corner’ than a new crisis erupts in the emerging market economies. The new urgency is a currency crisis in many countries including India, Indonesia, Turkey, South Africa and Brazil. A resulting slow-down in these increasingly important high growth economies will stifle growth globally and could yet derail the US/European recoveries. (China, whose currency is not as vulnerable as other emerging economies, has its ‘debt dragon’ which is another crisis waiting to happen.) 

In July the Economist and its sister newspaper the Financial Times began reporting, sometimes on a daily basis, the new crisis. Although there are many underlying reasons the currency crisis was sparked off by news of the US Federal Reserve Bank’s announcement in May that it may begin reducing, or ‘tapering’, its purchase of government bonds, i.e. its third quantitive easing programme, nicknamed QE3. This extraordinary monetary measure to support the US recovery has effectively been pumping $85 billion a month into the global economy since early 2012, on top of the trillions of dollars' worth of other US stimulus packages since the beginning of the great crash five years ago.

With historically low interest rates in the US much of the monthly $85 billion has been borrowed by speculators who invested in the emerging economies’ currencies and stock markets where returns were much higher. The Fed’s plan to taper the stimulus and the expected effect on US rates has caused vast quantities of this ‘hot money’ to exit the emerging economies back to the US. David Pilling, writing in the FT on 21 August, said ‘the prospect of a gradual withdrawal of stimulus by the US Federal Reserve and a rise in American interest rates...has produced a giant sucking sound as risk capital retreats [from emerging markets]’.

The central banks of the effected countries have managed to patch things up but much more needs to be done to create more resilient and sustainable economies in the developing world. Throughout the boom years of the past decade policy makers in these countries, like those in the advanced economies, were content to rest on their laurels (or, as some say, were reluctant to turn the music off while everyone was dancing) and failed to enact sufficient reforms to cope with the realities of a rapidly changing and increasingly volatile world.

Meanwhile, although Africa was hailed earlier this year as the Hopeful Continent and new global growth engine, most notably in the FT/Economist ‘Africa Rising’ campaign, nothing was being said about how the continent might be affected by the new crisis. This omission was striking particularly as Africa has become increasingly reliant on its new ‘south-south’ partners in the emerging economies. For this lack of discussion, I wrote a letter to the FT on August 27. The following letter was not published:

Sir,

As concerns mount for the global economy, (‘Call for aggressive action over emerging markets crisis’ – Aug 25), one big question needs to be asked: What about Rising Africa? The world’s most hopeful continent is still the most vulnerable on many fronts, especially another economic crisis.

At the start of the FT/Economist ‘Africa Rising’ campaign earlier this year, Africa’s uncertainty was summed up in the FT by Sebastian Mallaby on Jan 1: ‘Africa is hooked on growth’, he wrote, with the warning, ‘but there is no guarantee of future progress’. Six months later Barack Obama on his June tour of Africa also summed up the concerns. ‘Africa is rising’, he said, ‘but on a fragile foundation’. In ‘IMF outlook: what happened to Africa?’ (beyondbrics July 9) we were reminded that, ‘despite all the Africa rising headlines, the region’s rapid growth will not be without some bumps along the way.’ How big the bumps will be is critical.

Perhaps the gravest warning of the bumps ahead comes from Richard Walker, one of the most bullish of Africa analysts who contributed to The Fastest Billion – the story behind Africa’s economic revolution published last year. Writing in this June’s edition of Africa Business magazine Mr Walker says, ‘Africa is heading for a crash, it has happened before and it can happen again, and when it happens – if it happens – it will be very, very big.’ But he is quick to add that it can be avoided if Africa’s policy makers and business leaders ‘manage the moment, see the threats that are on the horizon, and act on them’.

Mr Walker identifies three major ‘danger points’: reliance on commodity exports, a huge infrastructure deficit and China dependency. Although ‘this time is different’ in Africa, when it comes to threats on the horizon, today’s are no different to those in previous booms except that the dependency was not on China but on the West.

But what is different this time is that African leaders see the threats on the horizon and are trying to act on them. Twenty years ago, standing in the wreckage of the post-colonial development model, Africans launched new green development strategies to rebuild their ravaged continent. In the past 5 years leading Africans including late Ethiopian prime minister Meles Zenawi, former UN secretary-general Kofi Anan and African Development Bank president Donald Kaberuka, have been calling for green growth as critical to Africa's future. At Rio+20 last June African leaders called on the international community to work on a ‘green investment strategy to facilitate Africa’s transition to the green economy’.

But so far, the international decision makers are not listening. Perhaps more worrying is that most of this year’s record number of major conferences on Africa, including the Economist’s summit 'Africa Unchained: the Next Generation’ summit in February and the FT’s ‘Private Equity in Africa' summit in October, do not even have the green economy in their programs.

With the international community, preoccupied as it is with multiple crises, unlikely to deliver a green investment strategy in time to prevent Africa's coming crash, this is an historic opportunity for Africans to propose their own. The African Development Bank’s Green Growth Initiative is a good place to start planning. Ethiopia’s Climate Resilient Green Economy Strategy is another. There are many more.

At Davos in January, IMF Managing Director Christine Lagarde said, ‘2013 will be a make or break year’. With only four months to go (now only three) and another crisis never far away, Africans have no time to lose in making green growth plans. If they don’t, as Richard Walker warns, drawing on the title of Chinua Achebe’s most famous book, ‘things might just fall apart.’ If this happens Africa’s crash will not be contained.

END OF LETTER

In addition to threats outlined by Mr Walker there are many others on Africa’s horizons as recent attacks by Muslim extremists in Kenya and Nigeria attest. There is also the danger that African policy makers, like their counterparts in the emerging economies, will continue to enjoy the fruits of the current boom and fail to introduce urgently needed structural reforms to deal with these mounting threats. One of the great disadvantages of spreading democracy in Africa is that elected leaders, with only 4-5 year terms, do not have the time to bring about the necessary reforms. Short-term thinking also might lure Africans into excessive consumption instead of saving and investing for the future (Nigerians are the second highest consumers of champagne after the French, and Kenyans have a taste for premium brand, and premium priced, Scotch).

However, despite the multiple danger points in Africa, the leaders and people of the Hopeful Continent are well positioned to manage the moment, see the threats on the horizon and act on them. In the past twenty years sufficient foundations have been laid for Africans to develop investment strategies to facilitate their transition to the green economy. Or, in the words of a recent World Bank report on Europe and Central Asia, the transition from ‘Brown to Green’.

Africa has the right credentials to lead the way to more stability and resilience. Africa’s Consensus Statement to Rio+20 in June 2012 demonstrates that governments realise there is no other way forward. African economists, financiers and bankers are ready to work towards a green economy in Africa. The African Development Bank has placed inclusive growth and the transition to green growth at the center of its new Ten-Year Strategy (2013-2022). Africa’s scientists have sufficient knowledge. Africa’s engineers and technicians know the technologies they need. Africa’s businesses see the need to go green and are matching this with high levels of innovation and responsibility. Many of Africa’s foreign partners are investing in Africa’s green, green revolution. Organisation and management tools are being developed. Africa’s demographic dividend is unequalled. The countless green success stories around the continent today - initiatives, innovations and inspirations - are Africa's untold story.

If the green economy is the only viable pathway towards developing sustainable and resilient economies in each of Africa’s 54 countries, the pace at which they move forward must be accelerated. The brown economy, or business-as-usual, in Africa is expanding at an unprecedented rate. The scale and complexity of the challenges cannot be over-estimated and will require a coordinated, multi-pronged effort. At the historic Lem, or Green, Meeting in Addis Ababa in June 1992, the late Meles Zenawi, Ethiopia’s leader for 21 years and one of Africa’s green pioneers, called this ‘a multi-discipline, broad-spectrum approach [to development] for there are no piecemeal solutions to the problems at hand’.

The route towards green economies in Africa will therefore need to be approached from different angles beginning with the measurement of green economies, creating green institutions and developing sustainability frameworks.

Measuring green economies. Over the past 20 years, attempts have been made by governments around the world to measure green growth including experiments with green accounting, i.e. green gross domestic product. Since the launch of the UN’s Green Economy Initiative in October 2008, a vast amount of work has been done to further our understanding of how to measure a green economy. Much more, however, needs to be done. Africa’s greatest comparative advantage in a global economy that must eventually become green if we are to avert catastrophe is in its underdeveloped brown economies or lack of brown development. In this sense, the so-called Least Developed Countries are in the best position to develop something new.  

Creating green institutions. Institution building has always been seen as a prerequisite to African stability. However, African institutions must be designed and developed to meet the needs and challenges of the 21^st century. The current institutions, inherited from the colonial powers, reflect the lack of understanding of Africa by foreigners and need to be rapidly restructured and updated. For instance, many countries do not even have a minister for environment whereas traditional (pre-colonial) African institutions, such as Elders, would put the environment central to survival. Without greener institutions the transition to a green and therefore sustainable economy in Africa will be impossible. 

Developing sustainability frameworks. Green growth plans will only work if there is a level playing field for investors. In other words green investors who include social and environmental costs in their accounting will be at a disadvantage to a brown investor who ignores such externalities. A suitable framework for beginning to think about green growth planning, particularly in Africa’s vast and sometimes remote and challenging areas, is the river basin. The river basin is an independent ecological unit where the actions (positive or negative) of one development affect the outcomes of others. The river basin in Africa is where traditional interdependency has been practiced for millennia and sustainability has been most successful. Integrated River basin Management (Meles Zenawi's broad spectrum approach) has been well developed over the past 20 years and is one of the best tools available to Africans for making green growth plans.

A glance at articles on the Economist website (six free articles a week allowed) shows that the global economy is entering another unknown unknown - a cooling down of the emerging economies after 15 years of unprecedented expansion which has driven global growth: ‘Welcome to the post-BRICS world’ (06/05); ‘When giants slow down’ (07/07); ‘The BRICS: Life after the boom’ (video 25/07); ‘Emerging economies - the Great Deceleration’ (27/07); ‘Catching up is hard to do’ (31/07). In the recent on-line debate by the paper (20/08 – 31/08): ‘The BRIC economies – is the fastest period of emerging market growth behind us?’ 59 per cent of voters thought YES it is over and 41 per cent thought NO.

Although there is a general belief that the emerging economies are slowing there is no fear yet of them crashing like they did in the Asian financial crisis of 1997. These countries are much better prepared. But is Africa prepared for a such a slow down? Although there was a temporary respite for the emerging economies in September due to the US Federal Reserve keeping the printing presses running, what happens when the tapering of QE3 finally begins and Africa's new partners take another, bigger hit? What happens if China, on whom Africa depends so much, has the much-feared 'hard landing'?

Perhaps the most important question we should all be asking is whether Africa, through a series of coordinated and integrated green growth plans, can become a green growth engine the global economy urgently needs?