How Africa Rising turned into Africa Falling again
The good vibes only last so long, especially when the results do not match the hype. And after that happens, people stop believing
It was a good thing while it lasted, "Africa Rising". Great slogan; short and punchy. Great public relations value. And the media was using it in nearly every story it wrote about Africa. Actually, it invented it.
It was all things Africa. All-encompassing. It was inspiring. Unifying. It got people believing again. Finally, there was hope!
But, like everything else in life, what goes up must come down. Even Africa Rising.
The good vibes only last so long, especially when the results do not match the hype. And after that happens, people stop believing.
The phrase is not heard too often nowadays. That is because, unfortunately, Africa is no longer rising. It is falling.
However, the entire continent cannot be painted with a single brush. There are 55 countries in Africa and some of them are turning out strong growth numbers. Ethiopia is projected to hit 6.7% real GDP growth in 2017. Rwanda is looking at 6.6%, Kenya at 6.0% and Tanzania 6.9%. These figures are projected irrespective of the drought conditions engulfing East Africa.
But much of the continent is in trouble. Just look at sub-Saharan Africa’s leading economies as a bellwether. They are in tatters.
SA was reduced to junk status by the ratings agencies and Nigeria is gasping for air as its economy continues to be smothered under the weight of weak oil prices.
Africa’s slide started with the commodities crash in 2015. Countries rode the global demand for natural resources for years. Things were good. Everyone looked the other way. "Nothing to fix if it’s not broken", as they say.
Commodities were hot and were the continent’s key economic drivers. But then prices hit the skids and coupled with underdeveloped and underfunded private sectors, much of Africa was left twisting in the wind.
Africa’s greatest strength was also its biggest weakness. Because those who live by commodities alone, will die by them too.
All that is needed is one bad economic cycle and before you know it, you are down on the canvas with the referee counting to 10.
Africa simply could not absorb a punch like that. It was too fragile to begin with. Now, its main source of revenue was flattened.
Africa is like someone without savings. One day, he loses his job. The next day he realises he has no money in the bank and no means to support himself. Banking and credit in most African countries are also in a tailspin. Nigeria is in yet another full-blown banking crisis — its banks are not lending. The economy is frozen in place and no one is willing to make a move. Businesses are afraid to spend and hire. There are few dollars to be had and the naira is limping along.
Because of this, many debt and equity investors have pulled out of Nigeria, at least until oil makes a comeback. Irrespective of some positive signs, it could take years for the oil price to return to its previous levels, assuming it ever does. Recovery is a slow process.
Africa is in a full-out tizzy. Enter China. But China’s aspirations are in China’s self-interest alone, not Africa’s
SA, the continent’s most diversified economy, is also up against the wall. Real GDP growth is projected at a paltry 1.2%. Businesses are in a holding pattern. And the recent downgrades to its credit rating by Standard & Poor’s and Fitch served as a swift kick in the bum to an otherwise proud country. SA has slowed to a crawl as it contends with one political scandal after another, further eroding confidence in its future. President Jacob Zuma is desperate to hold on to power as he tries to fend off the endless corruption charges and a near-complete loss of confidence.
Africa is in a full-out tizzy. Enter China. But China’s aspirations are in China’s self-interest alone, not Africa’s. They might say otherwise, but it is Colonisation 2.0. Given the state of affairs in Africa, when China calls, Africa picks up the phone.
China pounced on Africa for two primary reasons: first, access to commodities. Raw, out of the ground natural resources — Africa has what China needs to power its economy. And second, China eyed Africa because it was vulnerable.
With Africa in a weakened state, China saw the chance to embed itself across the continent. It did so by spreading investment and manpower to many African governments in return for the keys to the commodities kingdom.
But this has rarely, if ever, trickled down to the man and woman on the streets of Lagos or Kinshasa. The continent is plagued by the same problems it has always been: rampant corruption, payment default, contract default, kidnappings, political power plays, currency manipulations, scandals, coups— you name it.
This scene has repeated itself time and again throughout Africa’s history. And all the private investment capital, global support and financial aid in the world never seems to correct the problem.
This is Africa today. I’m hoping it can make a comeback. It would be great to see Africa "rise" again. It can if it learns some of the harder lessons from the current downturn. If it does not, history will continue to repeat itself with every new boom-and-bust cycle and prevent Africa from developing much beyond where it is today.
• Levin is managing partner at Nexus Capital Markets in New York.