Economic development efforts in Africa have traditionally been the purview of foreign aid agencies, local and international NGOs and publicly-funded multilateral finance institutions. African governmental spending has also played a central role. Private-sector funded economic development, while existent, has been much less present and visible.
This situation, however, has been steadily changing over the past 15 years, and the growing Africa-focused private equity (PE) community has a unique opportunity to play its part in what is becoming a symbiotic development relationship. African economic growth has created opportunities for PE firms to create value and get returns, and, at the same time, PE is good for African economic development: it helps to create a robust and healthy business sector, which promotes job creation and political stability, and takes pressure off governments to be universal problem-solvers. At its core, African growth equity hires, while leveraged-buyout-style private equity in development markets fires. Read more
Chinese premier Xi Jinping’s visit to Africa this week will certainly cause an uptick in the hubbub in the China-Africa cottage industry in Washington and London. Over the past 15 years, China’s commercial relationship with African countries has expanded, grown and deepened, as China’s total trade with sub-Saharan Africa has grown from around $10bn to over $200bn.
Yet, suspicion and unsubstantiated myths are riddling the discussion of Chinese involvement in Africa among business leaders, politicians and policy influencers. Perhaps these tendencies are spillover from the Cold War; maybe there is an attractive simplicity to a rivalry of great powers in faraway places; or it could be that, despite intentions of removal, colonial paternalism in Africa is still buried in the forefront of western thought? Whatever the reasons may be, this week’s Summit of the Forum on China-Africa Cooperation (FOCAC) in Johannesburg – a gathering of African presidents and Chinese leadership that happens every three years – provides an excellent opportunity to rationalise the China-Africa discussion and dispel five common myths that are unfortunately becoming assumptions even at the highest levels of policy-making. Read more
The steady economic growth that Africa has enjoyed over the past decade is now waning. Global commodity prices, particularly oil, have weakened and China, Africa’s largest individual bilateral trading partner, has slowed considerably as it rebalances itself away from investment and growth. According to the IMF, a 1 percentage point decrease in China’s investment growth is associated with an average 0.6 percentage point decrease in Africa’s export growth rate. The depth of the China-Africa trade relationship explains why this month, the World Bank, in its annual Africa’s Pulse report, downgraded Africa’s growth projections from 4.6 per cent in 2014 to 3.7 per cent in 2015 – the lowest growth the region will have seen since the ripples of the global economic crisis hit it in 2009. A new period of slow growth demands new and creative responses from African leaders.
While the commodity climate and China’s slowdown are certainly a challenge for African policymakers, they also present a unique opportunity. Relying on the beneficial economic climate that has fostered complacency with market inefficiencies is now no longer an option. Necessity will demand that African governments adapt to unfavourable global trends by squeezing greater productivity from the structures and systems that are already in place. East Africa is already quietly making strides in eliminating economic inefficiencies and the progress has much to teach the rest of the region. Read more