New play­ers in Africa’s ‘bat­tle of the scarves’

CityPress - - Busi­ness - ELENI GIOKOS busi­ness@city­

Since the 2008 global fi­nan­cial cri­sis, en­thu­si­asm about Africa has been un­bri­dled. Sup­pos­edly end­less op­por­tu­ni­ties, cou­pled with high growth rates, grabbed the at­ten­tion of global in­vestors.

The rush to Africa be­came a peren­nial talk­ing point at the World Eco­nomic Fo­rum (WEF) in Davos, prompt­ing an in­crease in Africa’s par­tic­i­pa­tion at the pres­ti­gious gath­er­ing of world lead­ers.

This year, how­ever, the con­ver­sa­tion has shifted. In­vestors are now re­flect­ing on the eco­nomic head­winds fac­ing al­most all emerg­ing economies. Davos 2016 looks set to be a tough one for African del­e­gates as they try to main­tain in­ter­est in the con­ti­nent.

In Davos, mar­ket­ing can be just as im­por­tant as high growth rates. In 2010, South Africa was the epi­cen­tre of ex­cite­ment as the coun­try pre­pared to host the Fifa World Cup. The South African del­e­ga­tion pulled off a cheap but highly ef­fec­tive mar­ket­ing coup that saw most at­ten­dees sport­ing a scarf bear­ing the South African flag mo­tif.

A year later, Nige­ria fol­lowed suit. A scarf-based ri­valry be­tween Nige­ria and South Africa be­gan, with del­e­gates pledg­ing an un­of­fi­cial al­le­giance by wrap­ping them­selves in their favoured neck­wear. This bat­tle of the scarves at the WEF seemed to mark a clear shift in per­cep­tions to­wards the con­ti­nent.

Prior to the cri­sis, Africa was seen largely as the global econ­omy’s “prob­lem child”. In 2008, as many of the de­vel­oped world’s economies seemed to be crum­bling, a par­a­digm shift oc­curred. Africa be­come the last eco­nomic fron­tier.

But by 2014, when Nige­ria re­based its GDP and took the top spot as Africa’s largest econ­omy, the con­ver­sa­tion had evolved. In­vestors were en­thu­si­as­ti­cally ex­plor­ing the plethora of op­por­tu­ni­ties in Africa’s two pow­er­houses.

This year an­other shift may be on the cards. Africa’s rich­est man, Nige­rian bil­lion­aire Aliko Dan­gote, will be at­tend­ing Davos 17% “poorer”, ac­cord­ing to an­a­lysts, who say his net worth has fallen to $17 bil­lion (R284 bil­lion). Not such a prob­lem for him, per­haps, but the weak naira and the collapse in oil prices have wiped bil­lions of dol­lars from Africa’s largest econ­omy and all in the coun­try will be feel­ing the ef­fects.

This is not just Nige­ria’s prob­lem, though. Low com­mod­ity prices and cur­rency volatil­ity are among the key themes plagu­ing Africa and its in­vestors in 2016.

The rand has hit a new all-time low of R17 to the US dol­lar, with the cur­rency de­pre­ci­at­ing 35% over the past year. Africa’s most in­dus­tri­alised na­tion is ex­pected to grow by just 1.5% this year.

Apart from the ob­vi­ous do­mes­tic is­sues faced by com­mod­ity-pro­duc­ing na­tions, most African coun­tries have also been af­fected by slow­ing growth from China and the tight­en­ing of in­ter­est rates by the Fed­eral Re­serve in the US.

Then there is the rise of ter­ror­ist groups. Nige­ria, Kenya, Mali and oth­ers all face is­sues there.

This year, African del­e­gates may have to con­vince in­vestors to stay com­mit­ted to the con­ti­nent by fo­cus­ing on the very same sec­tors that re­ceived so much at­ten­tion just two years ago: re­tail, telecoms, power and in­fras­truc­ture.

It is not all gloomy, though. Sub-Sa­ha­ran Africa is still ex­pected to clock in growth of 3.75% in 2016 and is still home to some of the fastest-grow­ing economies in the world.

In fact, this year’s most in­ter­est­ing sto­ries may come from out­side Africa’s “big two”. Coun­tries such as Ethiopia, Rwanda, Tan­za­nia and Mau­ri­tius are all show­ing prom­ise, with strong growth rates, al­beit from a low base.

While these coun­tries do not have a big pres­ence in Davos, at the mo­ment they are the most re­silient economies in Africa. Per­haps they should con­sider in­vest­ing in a few scarves. Giokos is a Jo­han­nes­burg-based busi­ness correspondent at CNN. CNN will be re­port­ing through­out the World Eco­nomic Fo­rum in Davos from Jan­uary 20 to 23 2016.


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