December 2014 – African Footprint

Did you know that approximately 600 million people (almost double the size of the US) are without access to electricity?

This is the magnitude of Africa’s underlying problem.

Africa to Date

The continent has come leaps and bounds over the last decade or so, creating good economic growth, with some nations proving to be a more resilient outfit in contrast to developed economies following the recent global economic recession. This key change was hugely reflected in Foreign Investment Direct (FDI) inflow to the continent, where it experienced a fairly stable influx whilst developed nations faced declining FDI following the crisis.

With such investment, provided injection into Africa, and opportunities to exercise projects that ultimately played an important role in changing fortunes. Nigeria, the largest recipient of FDI in Africa, has been one of the largest benefactors from the swings in the global economic structure.

Changing Dynamics

Aliko Dangote, Sourced: http://www.Bellanaija.com

Africa has been identified as home to one of the fastest growing millionaires, ranging from sectors such as telecommunications, manufacturing and technology.

It has become somewhat of a phenomenon in its own right given that wealth has historically been attributed to individuals with strong political / military ties. Aliko Dangote, the richest man in Africa provides testimony that the African Market remains to be hugely prosperous if the right opportunity presents itself.

Power Problem

South Africa, a country with the largest power capacity in sub-Sahara Africa is by far the most advanced in the region. Nigeria, the most populous nation in Africa, has a power capacity of 6GW, which stands at approximately 7 times less than South Africa’s capacity, but faced with a population that is 3 times more. It is by far lagging behind other emerging economies such as the BRICS as well as the likes of Mexico, Indonesia and Turkey whom are currently more advanced in the race for increased power capacity.

Nigeria is facing a supply problem. If you are familiar with Nigeria, then you would most likely come across the term N.E.P.A, National Electric Power Authority, now known as the Power holding Company of Nigeria (PHCN) as well as the phrase ‘Nepa has taken light!’; underlining the frustration and the inadequacies to supply power to consumers without any interruptions.

The repercussions of such incapability’s have a negative impact on the cost of living and the cost of manufacturing, ultimately damaging the competitiveness of exports.

There is however room for optimism, with the World Bank pledging to give $1.7bn to Nigeria in an attempt to contribute to the growing power sector.

Power to the People

Africa as a continent has some way to go if it is to compete with Asia and South America. It will be a signal of intent if further projects of power expansions are brought forward to help develop industries, sustain growth, and the lives of people. It is clear however that whilst some nations are making bold moves to improve power capacity, other nations have yet to place it as top priority.

The only way to predict the future is to have the power to shape the future,

And as for Dangote, one can only imagine what he could be worth once power initiatives fully materialize.

The New Development Bank formed by the members of the BRICS in July 2014 seek to put the interest of Africa at its forefront, a continent starved of much needed infrastructure.

Despite the cracks in continent, Africa is making large strides in certain issues in comparison to the last decade or so. Is it time to get excited? Well yes, but a lot of work needs to be done if we’re to continue to remain hopeful.

Africa needs help and simply offering pain relief in the form of Aid does not address the underlying issues which plague the continent but instead creates societies that become dependent on Aid.

New Development Bank?

The introduction of the New Development Bank (NDB) signalled a pivotal moment in who to approach, in regards to how projects are financed. The establishment of the World Bank and the IMF in 1945 following the Second World War brought about a new way to access loans for countries that were in need of rebuilding.

However, the emergence of the BRICS added a twist in demonstrating how economies like China can outperform economic powerhouses like the USA. Calls to reform the World Bank voting power system were highlighted, to enable countries like China a greater say in global economic decisions. Unfortunately other members of the institution did not endorse this wholeheartedly.

Fears of bias in favour of the West, who have a larger voice in World Bank and IMF has been a long serving debate, and so the introduction of the NDB set up by the BRICS could create a fairer environment in dealing with Africa’s needs.

The Challenge

Africa requires about $93bn a year for the next decade according to a World Bank Report if it stands any chance in closing the infrastructure gap between other continents and sustaining strong levels of growth for years to come. The NDB however does not have such capacity to offer these demands, but at the very least provides the continent with greater choice for financing projects.

It is the responsibility of the BRICS nations to remain focussed in creating a bank that seeks to contribute to the development of Africa. It will be an absolute failure if this primary objective is not given the attention it rightfully needs.

Talking Points

An initial fund of $100bn for financing projects has been set up by the BRICS, with the headquarters at Shanghai, China, whilst the African Headquarters is located in South Africa.

Could they offer Africa a fairer voice and cheaper finance that the continent have longed cried for?

And if so, is there a danger that offering cheaper long term finance to Africa could overlook the real concerns such as risk?

Answers to these questions will really be put to the test from 2016, when the first scheduled finance offering is set to commence. It is imperative that African nations take responsibility in ensuring that subject matters such as governance are faced head on in the meantime.

For the foreseeable future Africa is

Month: December 2014

Now is the time to Power Up