Africa’s economic miracle is under threat
AFTER years of dictatorships, military coups and one-party regimes, Africa emerged in the mid-1990s to record one of its most successful periods of economic prosperity. But its high growth rates, boosted by improved commodity prices, macroeconomic stability and an environment more conducive to business, may be under threat.
Growing economic and political risks, such as domestic political attrition, recalcitrant rebel insurgency and the burgeoning jihadist offensive, may undermine the positive prospects. These risks, which pose a severe threat to Africa’s business environment, can reverse Africa’s economic gains. Sound sovereign investment wisdom advises African leaders to do all they can to preserve capital and sustain business investment grades. However, the volatility of Africa’s macroeconomic environment is unsettling.
African regional groupings have stepped up their efforts to promote the security of business interests. The Southern African Development Community (Sadc) has had some positive results. After its intervention, Madagascar is set to hold parliamentary and presidential elections without the participation of either of its former leaders. Madagascar, therefore, has the opportunity to reverse its slide into the category of failed states and improve its investment environment.
The Sadc’s involvement in Zimbabwe is also achieving results, as a constitutional referendum is now set to take place, followed by elections based on the constitutional framework arising from the Global Political Agreement signed by Zimbabwe’s political parties. The Zimbabwean example demonstrates how the rise in assertive regional diplomacy can play a role in solving domestic instability.
In West Africa, the Economic Community of West African States (Ecowas) has for years been engaged in security engagements in war-torn areas such as Côte d’Ivoire and Togo. At present, the Ecowas military command is contributing services alongside local and French forces in Mali to ward off jihadist militia.
In contrast, East Africa is dormant on this front. The lack of a united, regional response has left Kenya to manage the al-Shabaab threat on its own.
The widely observed global terrorism index is inordinately populated by African countries, evidence of the continent’s wide-scale vulnerability. And Africa’s response to insecurity shows poor continental security protocols, disparate and uncoordinated interventionism and unintelligent engagement with the rest of the world. Indeed, the worsening levels of insecurity in the Sahel and the Maghreb regions, in Northwest Africa, demonstrates that Africa is poorly prepared to respond to business risks posed by the offshoots of the jihadist movement. Attacks on business interests and threats to the legitimate political order in Algeria and Mali augur ill for African business sentiment. The jihadists’ modus operandi is capital destruction, the decimation of investments, the fomentation of civil strife and religious intolerance. Virulent terrorism is incompatible with business.
The great theorist of entrepreneurship, economist Joseph Schumpeter, appreciated the debilitating risk exogenous factors have on business. Demonstrating a tinge of contrariness at the time, he reasoned that the macroeconomic paradigm should be prioritised, as mere business savvy is not enough to ensure corporate success. This nugget is apt for Africa today, for security risks across the continent require a sound supranational counter-security framework that addresses some pertinent issues.
First, the continental framework should craft a common response mechanism to ensure the quality of countermeasures against terrorist threats, the efficacy of public-private initiatives and the maintenance of global security standards. Second, the security protocol should provide continental guidance on international partnerships with international players. Security challenges affect different regions differently, but global partnerships have demonstrated an ability to improve and strengthen security. Finally, domestic security agencies need modern training, equipment and a security philosophy so internal security initiatives adequately respond to these risks. Business risks can be mitigated by ushering in a modern, continent-wide security protocol that embraces global partnerships and prioritises the need for domestic security improvements.
• Mukwevho and Mekwa are country risk analysts in Rand Merchant Bank’s international credit division.
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