Sub-Saharan Africa has posted its slowest period of economic growth since 1999. It’s still rising but only just. Where some see doom and gloom others see opportunity.
The bad news
Oil prices plummeted from $100 a barrel to c.$30 (analysts at Standard Chartered believe prices could hit the $10 mark this year) which hit the oil exporters like Angola and Nigeria where it hurts prompting them to go cap in hand to the IMF. The FT reportedthat Ghana had an underwhelming cocoa harvest, the copper price did Zambia no favours and although inflation is falling pretty much everywhere else, it is rising in sub-Saharan Africa and is expected to hit 7 per cent this year and 7.25 per cent in 2015 sapping growth still further.
Nigeria, Africa’s largest economy, marks the one year mark of Buhari’s presidential succession (a relatively seamless transition albeit dogged by security concerns in the north of the country). A slew of further elections, of varying democratic merit, in Chad, Central African Republic, Congo, Uganda and Ghana will also add to the volatility of the region with Patrick Smith, editor of Africa Confidential, calling South Africa’s vote the most significant event since the liberation election.
Oh… and China’s economy (one of the largest investors in Africa) is staggering toward the weakest growth in a generation.
The case for rational optimism
In 2000 The Economist ran a front cover calling Africa “the hopeless continent”. In 2016 John Ashbourne, African economist at Capital Economics, told the FT that people misunderstood the concept of Africa Rising and is critical of the “irrational optimism” surrounding the weight of expectation for African countries to become the next Denmark or Malaysia.
However while Mr Ashbourne is absolutely correct to be liberal with the cold water- particularly in overcrowded markets complacently over exposed to the petrochemical and extractive industries there are still great stories to be told if you know where to look.
Let’s just start with the cultural milestones-
Nigerian, Okwui Enwezor curated 2015’s Venice Biennale- he was the first African to do so and challenged the zeitgeist to bring African artists to the forefront. The exhibitions were lauded as some of the most exciting in recent years with Ghanaian filmmaker John Akomfrah’s three-screen film “Vertigo Sea,” described by Okeke-Agulu as “searingly beautiful.”
ShoMax, part of Naspers went head to head with Netflix to own the video on demand market across the continent. Africa’s biggest company is now not an extractive or petrochemical giant but a media company.
The application of technology in the Africa Rising story is well documented- the continent all but leap-frogged fixed line connectivity and smart phones are now driving everything from financial inclusion to election campaigns and yes there is an app for herding cattle you can download it here.
A low oil price is bad news for exporters but should be good news for manufacturers and consumers. With the commodities crutch kicked away, a young, aspirational, tech savvy and entrepreneurial population may see a generation, through necessity develop a genuinely diversified economy.
Judith Tyson from Overseas Development Institute, points out that the current situation (oil, China etc) was well telegraphed and that the growth story is now coming from a low base in Ethiopia, Sierra Leone, Democratic Republic of Congo, Madagascar and Ivory Coast.
The risk-reward ratio on doing business in some of these markets is not to everyone’s taste. The challenges are considerable- from corruption and governance to infrastructure and security but as international companies, backed by oversubscribed but under deployed PE funds, explore the opportunities they will discovering that necessity is the mother of invention.