By Farhana Haque Rahman
ROME, Oct 18 2019 – Headwinds are blowing amid IMF warnings of a “synchronised slowdown” in global economic growth, yet Africa’s investment drive is still gathering pace, supported by intense international competition in development finance.
Despite the global slowdown, 19 sub-Saharan countries are among nearly 40 emerging markets and developing economies forecast by the IMF to maintain GDP growth rates above 5 percent this year. Particularly encouraging for Africa is that its present growth leaders are richer in innovation than natural resources.
While Akinwumi Adesina, president of the African Development Bank, admits to sleepless nights over the “headwinds” to African growth – primarily the US-China trade war – he remains excited over the continent’s prospects as the AfDB gears up for its annual Africa Investment Forum.
The November 11-13 gathering in Johannesburg follows major milestones achieved in 2019, notably the coming into force of the African Continental Free Trade Agreement, described by Adesina as a “phenomenal development”.
In May, 54 of Africa’s 55 countries became signatories to the initiative which aims to eliminate 90 percent of tariffs on goods and significantly reduce non-tariff barriers. The free trade area means to integrate Africa into a unified market with a population of over one billion and output of $1.3 trillion.
The AfDB does not gloss over the enormous challenges ahead, however, noting that 120 million Africans remain out of work, 42 percent of the population live below the $1.25 poverty line and about one in four in sub-Saharan Africa are undernourished. Africa is also most vulnerable to the global climate crisis, although it is the world’s least contributor to carbon emissions.
Under Adesina, appointed in 2015 and backed by his native Nigeria for a second term, the AfDB has responded to such challenges by scaling up investment in five priority areas dubbed the High 5s: electricity and energy; food; industrialisation; integration, and improving the quality of life.
At the UN climate crisis summit in September, Adesina announced the AfDB would double its climate financing to emerging economies to $25 billion from 2020-2025. Half would be aimed at helping governments adapt to the impacts of climate change, such as droughts and rising sea levels.
“Poor countries didn’t cause climate change, they shouldn’t be holding the short end of the stick,” the AfDB president said.
The bank will invest $20 million to help fund the Sahel’s new Desert to Power solar scheme, with Adesina seeing renewable energy as a driver of economic development and replacing all of Africa’s coal-fired power stations.
During his term the bank has increased the renewable power share of its energy portfolio to 95 percent from about 60 percent. Off-grid solar-powered energy is seen as key to connecting the 50 per cent of African households without access to electricity.
Last year’s inaugural Africa Investment Forum generated $38.7 billion in “investment interest” in infrastructure projects, and the multilateral lender is setting a target of $60 billion this year to close what it sees as Africa’s “infrastructure gap” amounting to $108 billion. As an investment marketplace which attracts heads of state, the AfDB says it will work at the Forum in conjunction with all commercial banks across Africa, as well as development finance institutions, global sovereign wealth funds and pension funds.
China’s presence at the Forum is sure to come under close scrutiny given Beijing’s focus on Africa, with President Xi Jinping’s flagship Belt and Road Initiative pledging $60 billion in financing for projects across the continent. China’s trade with Africa has soared over the past 20 years from about $10 billion to close to $200 billion. In a reflection of shifting balances of power, an analysis by Quartz found that nearly twice as many African leaders attended the Forum on China-Africa Cooperation in Beijing in September than the UN General Assembly in New York two weeks later.
Not to be outdone, Russia has invited over 50 African leaders to its first Russia-Africa summit in Sochi in late October, the culmination of a strategic push that marks Moscow’s re-entry into the continent, with its focus on military deals and oil and gas contracts. With trade and investment replacing aid, US and European multilateral lenders are also directing more funds towards Africa.
The Africa Investment Forum may also enjoy the glow of more favourable headlines for the continent in recent weeks: Mozambique held relatively peaceful presidential elections in mid-October, which followed the signing in August of a peace deal between the ruling Frelimo party and former civil war rivals Renamo; and Ethiopian Prime Minister Abiy Ahmed was awarded the Nobel peace prize for his role in resolving the border conflict with Eritrea, as well as promoting peace and reconciliation in Ethiopia and the wider East African region.
Mozambique sees itself on the brink of substantial investments following its discovery of huge gas reserves while, as commentators noted, Abiy’s first official state visit outside Africa after coming to office last year was not to the traditional western capitals or even Beijing, but to Riyadh and Abu Dhabi, major investors in his ambitions to transform Addis Ababa.
With foreign investors and multilateral institutions gathering at the door, the AfDB’s president is addressing fears that Africa is piling up debt and mortgaging its future.
“What’s important is that African countries get into deals that are transparent with terms of engagement that are clear,” he told Bloomberg in September.
“If there were cases where some folks got away with deals in the past because others aren’t around the table to help negotiate well — that’s changing. I don’t think any African nation should trade away its future for immediate gains. We want fair and transparent transactions.”
Farhana Haque Rahman is Senior Vice President of IPS Inter Press Service; a communications expert, she is a former senior official of the United Nations Food and Agriculture Organization and the International Fund for Agricultural Development.