Two opposition heavyweights in the south-west of Nigeria are slugging it out for the leadership of the main opposition party, just as the region is threatened by clashes between local farmers and nomadic herders from the north.
Hannibal: Ghost of a recovery
Africa’s resilience in the face of global pressures has earnt it a serious look from investors.
One big fear likely to haunt finance ministers in 2011 is that the financial skirmishes between Western countries, Asia and Latin America will escalate into a full-scale currency and trade crisis. Among the most forthright is Brazil’s finance minister, Guido Mantega, who argues that the currency war has already begun.
World Trade Organisation (WTO) director general Pascal Lamy is more cautious. “I don’t want to talk in inflammatory language,” he tells The Africa Report. “Currency disputes may indeed become trade disputes, but I would not expect trade wars.” ?
The WTO takes some credit for the way international economic cooperation after the 2008 financial crisis averted more protectionist moves.
According to IMF economists, a global currency crisis, assuming it doesn’t spiral into a trade war, will have a limited effect. Africa is largely insulated from global financial circuits, except for South Africa where the rand has become increasingly overvalued as investors bought into money markets. Nigeria’s naira has been falling due to local political factors.??
Africa, argues the World Bank’s Africa economist Shanta Devarajan, must draw more money in: “Today’s capital flows are not reflective of the potential returns to investment in Africa.” He quotes a recent study showing that the average annual return on equity for 954 publicly traded Africa-based companies was 65%-75% higher than that of comparable firms in China, India, Vietnam and Indonesia.
Devarajan says that foreign aid should help to leverage other public and private financing. For example, the World Bank’s $115m loan for Uganda’s Bujagali hydropower project helped Kampala raise another $635m.
An improbable boost for Africa comes from US economist Nouriel Roubini, aka Dr Doom, who predicted the 2008 crash. He advised fund managers to go into Ghana, Kenya, Nigeria and Tanzania. “In comparison with 10 years ago when there was civil strife and unstable government, many things have improved,” says Roubini, criticising those investors who were sending “a wall of money” into China, Indonesia and India without looking closely at underlying fundamentals.??
The fundamentals in Africa, stronger macro-economic management and higher production of mineral, oil and agricultural exports, were favourable enough to bring in investments of some $47bn per year before 2008, as Devarajan points out. Africa’s resilience in the face of global pressures supports Roubini’s case for investors to take a closer look.