Africa’s Investment Drive Gathers Pace

Africa Investment Forum 2018

By Farhana Haque Rahman
ROME, Oct 18 2019 (IPS)

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.

Akinwumi Adesina

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

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.

Farhana Haque Rahman

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

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Africa’s Investment Drive Gathers Pace
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Africa’s Investment Drive Gathers Pace