Sub-Saharan Africa: region of renewal
The new leaders of three sub-Saharan countries presented positive messages at last month’s Africa CEO Forum, and there is widespread expectation that their policy changes will bear good fruit
The political winds have turned in sub-Saharan Africa. A year ago, you could hardly imagine an SA without Jacob Zuma at its helm, a Zimbabwe without Robert Mugabe or an Angola without José Eduardo dos Santos. But as political transitions have taken hold within the ruling parties of the region, there’s been a renewal of the "Africa rising" scenario.
A palpable sense of optimism, driven by events of recent months, was evident at the Africa CEO Forum, held in March in Abidjan, Côte d’Ivoire, where business leaders and politicians came together over fried plantain, dark chocolate and Ivorian coffee.
As stories of political change and the economic promises they bring were presented, it was almost as if the new presidents of SA, Angola and Zimbabwe had been given the same brief and the same speech to deliver, with the instruction to "change it a little so it sounds like it’s your own", and the same motto: "We are open for business."
Over the past eight months, the leaders of the three liberation-movement regimes — countries crippled by weak economies and political backlash — fell like a row of dominoes, replaced by market-friendly leaders. The idea was novel: instead of giving in to the opposition, become the opposition in your own party.
SA is undoubtedly miles ahead of Zimbabwe and Angola, where democracy was constrained for decades and, in Zimbabwe’s case, where the country was subjected to sanctions. For them, it’s like emerging from apartheid.
But SA has also been drawn into the momentum of a new awakening. Some have described the excitement in the country as similar to that felt during the 1994 elections.
Despite the euphoria from investors at the CEO Forum, there still remains the challenge of implementation.
In the case of Zimbabwe, the economy requires an overhaul, with an emphasis on infrastructure and job creation. The country’s new administration, under President Emmerson Mnangagwa, has signalled its intention to change many of the policies that undermined investment and move ahead with crucial fiscal consolidation.
BMI Research, a subsidiary of Fitch Group, says in a report that the final stage of reform — the move away from dealing in US dollars to trade exclusively in the local currency — is likely to present significant headwinds to growth before the economy begins to rebound.
In addition, the death of Zimbabwean opposition leader Morgan Tsvangirai, which came soon after Mugabe’s exit, means Mnangagwa may not face strong opposition in a presidential election.
Despite the arduous journey ahead, Mnangagwa said at the opening ceremony of the forum: "The investment community will be very pleasantly surprised with Zimbabwe’s future ... Our attendance resonates with our desire to re-engage with the international community after isolation for decades."
In Angola, João Lourenço has taken over the presidency from Dos Santos. His first move as president was to put in place an anticorruption campaign that is winning him credibility as he moves to free the economy from the grip of patronage networks. The introduction of a new exchange-rate regime and policies to streamline the investment process are among the longer-term changes.
The Angolan economy is getting back on its feet. GDP expanded 0.9% in 2017, rebounding from the previous year’s level. Research firm FocusEconomics says policies implemented by government, such as the devaluation of the kwanza, should improve foreign currency supply in the economy.
SA breathed a sigh of relief after a recent reprieve from ratings agency Moody’s, which credited President Cyril Ramaphosa’s administration with halting the erosion of institutions such as treasury, the SA Revenue Service and state-owned enterprises. But there remains some distance to go in terms of growth, policy certainty (particularly in relation to the mining charter and land reform) and commitment to fiscal consolidation.
As markets watch over the next year to see whether SA, Angola and Zimbabwe can buck the trend and create further optimism from within their ruling parties, the general view is that there will be an even better tale to tell a year from now.