Best-selling author and journalist Christopher McDougall once wrote: “Every morning in Africa, a Gazelle wakes up. It knows it must outrun the fastest Lion, or it will be killed. Every morning in Africa, a Lion wakes up. It knows it must run faster than the slowest Gazelle, or it will starve’.
Except that it’s not an Africa specific phenomenon.
While we may wait for the meek to inherit the world; the name of the game at least in our lifetime is:
‘Survival of the fittest ‘
Universal and all pervading.
But brute force won’t cut it anymore.
In today’s multipolar world, one will need to be tactical and smart about it.
After my 3 decades plus of investing, transacting and strategising in Africa; the Big 5 lessons I share are:
1. They who have and keep coming to Africa do not quite ever leave. Wonder why.
2. Enrichment and global (read the few) commerce & prosperity has always required an African exploitation at its core. As the night follows the day.
3. An innate sense of entitlement pervades the western (G7) mind; no doubt shaped by centuries of conquest and self aggrandisement. An elated sense of self-importance.
4. Failure by successive African governments to develop and provide for the masses is seen as a failure of the Africans and themselves rather than it being a deeply systemic one borne out of centuries of exploitation and selective empowerment.
5. Forgetting that the colonial powers themselves ruled by enriching the few. A complete and thorough amnesia around historical brutality, stripping of rights and dignity and its manifold repercussions in terms of the legacy of glaring structural gaps that torment today’s policy makers.
That which therefore hides the sheer scale of the challenge of bringing in an all-inclusive growth.
Except that times are changing.
Because Africa has choices.
It has the East, the Middle East, the south-to-south solidarity and indeed the geo political recalibrations to thank for.
Like a Phoenix, it has been leased a new life as the myopic great powers bicker, compete or disintegrate.
Someone poignantly told me that Africa must stop taking Asian take aways.
I told her that it’s better than Western leftovers.
At least choices are being exercised.
And for good measure, I had to point out that indeed for so many good reasons the ‘fine dining’ ala carte option is also opening up for African nations.
Where Africa can choose what and how it all must be cooked to suit their own palate.
The world has always had the narrative of the 7 natural wonders. Globally only 7 though.
Narrated to us by the G7 as being fundamental truths.
Yet Africa today holds the ace at all the world’s problems.
In itself, it’s a 7-wonder kid.
And what are those exactly?
1. Food security and the abundance of untilled arable land. 1200 million hectares of it, 60 % of the world’s uncultivated land.
2. Renewable energy untapped. Last count 62 gigawatts.
3. Disproportionate concentration of Critical energy transition minerals in Africa. abundance. 70 % of cobalt production, 60% of manganese, etc.
4. Labour force of the world. 1.5 billion people are growing at 3 % annually out of which 40 % is below the age of 15. The youngest continent!
5. New markets i.e. the African consumer currently at 1.2 billion projected to grow to 2 billion by 2035.
6. Geopolitics that need support votes. The largest percentage (28) of UN members is from Africa.
7. Emissions and their absorption from African forests, carbon Credits et al. Currently African forests remove 1.2 Gigatons of CO2 annually.
And the top up:
The need for supply chain diversity and easier location access for global trade.
Africa, with its abounding coastline and geographical location fits snugly between historical trade routes and can reduce global shipping and its related emissions.
The problem is, however, the original sign of inertia.
Legacy civilizations and their models of ‘meddling and manipulating’ are an impediment to sensible global decision making.
As their own damaged political systems and a warped sense of justice leads them to an assured path of mediocrity. While newer powers are smoothly and assuredly moving to fill that void.
Therein lies Africa’s salvation as it becomes the solution to the world’s problems.
Capital, we know is lazy. It seeks warmth and affection.
Additional rules around ESG and SDG have further constrained allocations.
The climate agenda, which is essentially a financing crisis, means current custodians of capital will seek to focus on home markets.
Sanctions and unilateral asset freezing, however, is forcing capital surplus regions to diversify and immunise their wealth. And do bilateral local currency funding to avoid western scrutiny and sanctions often imposed for narrow ends.
So whilst a beleaguered and debt ridden western world seeks to urgently fix its own issues, the real savings and capital are moving into real assets, precious metals and funding actual prosperity in the frontier markets of Africa.
Financial markets, especially bond markets as we know, will face the heat of reallocated priorities which along with inflationary pressures arising from an urge to impose tariffs and kick start domestic manufacturing will keep rates high.
While that is not good news for the developing world of Africa already starved of capital and burdened by extraordinary financing costs; this paves the way for 2 things:
1. Bring back your own capital and reserves that has hitherto been invested passively in global financial markets
2. Seek financing in alternative currencies and sources that are prepared to take development risks.
In Africa, the risk reward payoff is skewed negatively from the perception side while enormously favourable in actual default rates and return side.
It has one of the lowest default rates globally.
That’s why the old adage of Africa remaining rich while Africans remain poor is a continuum.
Those who believe that risk taking is crucial and risk management is after all a human science will prosper as returns will follow not the brave but the logical risk manager.
So, what’s in store for Africa?
Winds of change are afoot.
GCC countries are crowding into the port,
Logistics, Industrial Park space. And for good measure into renewables and food sectors.
Fascinatingly now, there is a clear push to develop a manufacturing base in the region that has therefore manifested into a drive to source minerals and metals.
That’s a few sectors already for African investment opportunities.
African sovereign bonds and other debt issuances are now actively bought by the GCC region investors too as are African bank lines of credit and trade finance that receive liquidity support from GCC banks thereby compressing the risk spreads on financing costs.
India poses an interesting additional dimension.
With Africa’s strategic importance rising, India has leveraged the global trust deficit to become a trusted interlocutor.
India’s biggest masterstroke was its effort to ensure the AU’s inclusion in the G20
African countries notice how India no longer allows the West to dictate its morality.
As Vera Songwe wrote in the Financial Times, ‘India’s presidency of the G20 delivered one of the most significant shifts in global governance in a decade: representation for [1.4 billion] people at the world’s premier economic co-ordination body.’
India offers a different development model to China – based on inclusion and transparency.
Indian private sector alongside Indian banks are vital tools through which investments are happening and boosting the already significant historical Indian diaspora presence in key areas of trade, real estate and manufacturing.
India’s dynamic private sector’s focus on digital infrastructure, technology and pharmaceuticals together with a soft power diplomatic strategy offers an alluring alternative.
And of course, the pragmatic ‘brown’ strategy of India to develop its renewable base while continuing with fossil (coal) energy sources fits snugly into Africa’s need for selective utilisation of its own fossil fuels for its own development while also harnessing the abundant green sources to provide a clean manufacturing environment for the World at large to produce where the minerals are and the labour force is.
China!
The dragon in the room.
Long revered and feared increasingly.
Now shifting from an extraction strategy to an investment one.
Their new focus is more on industrial production, job creation, investments that lead to African exports, and productivity-enhancing agricultural and digital technology opportunities and primary level processing supported by logistics.
The famed ‘Hunan model’ (named after the region in China) has a specific focus on agriculture, heavy industry equipment, and transport such as electric automobiles and trains. Hunan is a leader within China in these sectors which are seen as growth industries in many countries in Africa.
And interesting and compellingly, Both Chinese and Indian banking sector are putting their liquidity into African institutions and projects. An emerging trend that bodes well as fund flows becomes transparent and institutional.
The US suffers from bipolar myopia and its extreme domestic turbulence linked inextricably to its manifold international policy failures and arrogant diplomacy are making it languish behind.
Their engagement into Africa is thus muted, erratic and wholly public sector thus far.
But the Inflation Reduction Act (IRA) provides the overarching thrust to source minerals and the need to minimise China forces them to diversify supply chains. Both are opportunities for Africa and evidence is to be found in the Lobito corridor project which will link mineral chains into the Atlantic seaboard and enhance local value addition to win the hearts and minds of local people.
The European Union and its role in the Partnership for Global Infrastructure and Investment (PGII) means that large scale prosperity-based project financing will be available for Africa. The colonial greed and the subsequent guilt are now receiving profound support from a more basic emotion: fear.
The Russian war, the energy dependence, the China dominance and indeed trade reliance; together with clear evidence of hostile immigrant populations, economic refugees from the Mediterranean and the Sahel region; all are powerful reasons for a more structured engagement and partnership.
One sees how energy exports are taking shape from the African continent and the desire to develop industries to add value at source is receiving due attention finally.
Sprinkled amidst all this are the green shoots of inter African trade, local manufacturing and value-added processing.
The Africa Trade & Distribution company (ATDC) has been launched to support and build on regional logistics and trade solutions.
A bigger collaboration with Brazil on one side and Japan on the other is in the offing too; just to visualize the width of the choices.
Some recent and startlingly successful Samurai (yen based) issuances of African borrowers at remarkably lower rates buttress this point.
Simply put, from a mere object of desire and control, Africa is poised to become the much needed friend and companion for the World’s own needs.
Sustained financial flows more often than not are driven by political and strategic expediencies and less by narrower commercial objectives.
From where I sit, that is what is different this time.
The wonders of Africa are no longer exotic or nice to have.
It is the backbone through which continued development, prosperity and social order will work for the rich world.
And for a change, African leadership has woken up to the fact that in its own salvation lies the solutions to many of the global problems.
It must control the dialogue and mentor the investor so that value is added and not simply exported out.
Time Africa made more money from its gold being the producer than Switzerland which produces none.
And that’s just one metal story.
That is why investments are flowing will flow into Africa.
We must be ready.
I had read somewhere that:
Africa is not just a place; it is an emotion, a state of being where the rhythm of life beats in harmony with the pulse of the wild.”
It’s time for Africa to be in sync with the world now and to be that Unity the world is looking for.
The ancient African motto is: ke e: /xarra //ke, written in the Khoisan language of the /Xam people, literally meaning:
‘Diverse people unite’
Let’s do that.
- Annual Report 2024
- Section: Spotlight on MEASA
- 2
Why it flows into Africa
- Sanjeev Gupta
- Africa Finance Corporarion
- Sanjeev Gupta is the Former Board member and Executive Director for Financial Services at Africa Finance Corporation. He was responsible for Treasury, Trade Finance & Financial Institutions, Syndications, Advisory lines of business within AFC. Mr. Gupta has over 30 years’ experience in Investment Management, Private Equity and Corporate Finance. His forte has been to blend together global and indigenous corporates, financial investors, and governments to develop commercially viable businesses and development models that leave a sustainable impact on emerging economies.