Sorry, but somebody had to say it.
“Africa Rising” was a good thing while it lasted. Great slogan. Short and punchy. Five syllables. Great PR value. And the media was using it in nearly every story they wrote about Africa. Actually, they invented it. It was all things Africa. 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.
Because the good vibes only last so long especially when the results don’t match the hype. And once that happens, people stop believing. You’ve probably noticed that you don’t hear that phrase too often anymore. That’s because today, unfortunately, Africa is no longer rising. It’s falling.
However, one needs to be mindful of painting the entire continent with a single brush. There are 54 separate countries that make up Africa. And of course, 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% and Kenya at 6.0%. Tanzania, 6.9%. And these figures are projected irrespective of the current drought conditions engulfing East Africa.
But still, much of the continent is in trouble. Just look at sub-Saharan Africa’s leading economies as a bellwether. They’re in tatters. South Africa was reduced to junk status by the rating 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. Before that 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.
Ironically, Africa’s greatest strength was also its biggest weakness. Because if you live by commodities alone, you’ll die by them too. All you need is one bad economic cycle and before you know it, you’re down on the canvas, flat on your back, with the referee standing above you counting to ten.
Africa simply couldn’t absorb a punch like that. It was too fragile to begin with. Now, its main source of revenue was flattened. And let’s face it, there has never been much room for error there to begin with. In many ways, Africa is like a person that has no 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 crises. Simply stated, banks aren’t lending. The economy is frozen in place and nobody 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 all together, at least until oil makes a comeback. And, irrespective of some positive signs, it could take years for oil to return to its previous levels, assuming it ever does at all. Recovery is a slow process.
South Africa, the continent’s most diversified economy, is also up against the wall. Real GDP growth is projected at a paltry 1.2%. Businesses there 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. South Africa has slowed to a crawl as it contends with one political scandal after the other, further eroding confidence in its future. And embattled President, Jacob Zuma, is desperate to hold onto power as he tries to fend off the endless corruption charges and a near complete loss of confidence.
So, Africa is in a full out tizzy. Enter China. But let’s be clear here, China’s aspirations are in China’s self-interest alone. Not Africa’s. They might say otherwise, but make no mistake, it’s Colonisation 2.0. And given the current 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. And it’s done just that 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’s always had. 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.
So, this is Africa today. I’m really hoping it can make a comeback. It would be great to see it “rise” again. And I think it can if it learns some of the harder lessons from the current downturn. If it doesn’t though, history will continue to repeat itself with every new boom and bust cycle, and prevent Africa from developing much beyond where it is today.
*David S. Levin is a Managing Partner at Nexus Capital Markets, LLC, micro-Blogging on all things Africa. A New York investor’s view of Africa and other emerging economies. Nexus Capital Markets is a leading Pan-African/U.S. investment bank located in NY and JHB.