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Friday, 25 January 2013 12:00

The Year 2013 in Africa – Challenges Ahead

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2012 has been a very difficult year for many economies. From the Arab upspring to the Euro debt crisis, the focus in 2012 has been on Africa as the “life boat” destination to be. 
The big Asian giants, China and India, have always been present in the continent.  Now, the World’s attention has started to shift to African countries with investors from Europe and US now eyeing Africa.  

2013 is expected to be a good year for Africa with an average economic growth of 5% according to the World Bank, the International Monetary Fund and the Africa Development Bank.  This economic growth will likely extend beyond 2013 as Africa benefits from a natural resource boom, strong internal demand from its rapidly growing middle-class, increased spending on basic infrastructure, robust foreign direct investments, and sizeable diaspora remittances.

Nevertheless, there are a number of internal and external factors which could adversely affect its performance. A key internal factor is the risk of disruption from social unrest. External risks include possible contagion from the uncertain global economic environment, as well as high fuel and food prices. On the other hand, increased engagement by African countries with China and India could help to cushion adverse effects from a downturn in OECD countries.  Below we list down some of the factors likely to affect the continent.

Unemployment in Africa
According to the 2012 African Economic Outlook, 70% of the population of Africa are under 30 years and at least 60% of the unemployed are young adults.  Many youth in Africa (70%) live on less than two dollars per day.  This is just above the target of USD 1 to eradicate extreme poverty as per the Millennium Development Goal of the United Nations. Nigeria, Ethiopia, Uganda and Zambia have 80% youth poverty levels.  Africa's army of educated and unskilled youth represents a huge unknown risk for the continent in 2013. In 2011, without warning, the youth of North Africa rose against autocratic, militarised governments. No country in Africa is immune from potential youth-inspired political earthquakes in 2013.

Democracy in key economies
This year is election year in Kenya and Zimbabwe.  The Kenyans will see two very popular presidential candidates run for power.  Both candidates are however accused under the International Criminal Court of alleged complicity in the murderous post-election violence in 2007.  Instability in Kenya would negatively impact the East African economy, one of the fastest growing hubs in the continent.

Zimbabwe will also see presidential elections this year.  The country is known to have very disputed elections over the last decade with violence mounting at times.  This new election will again witness intense battle for power with President Mugabe running against his Prime Minister Tsvangirai.  However, international communities will keep their eyes open and will likely sanction the country if violence were to erupt.  Violence in Zimbabwe would destabilise the Southern African region, with millions of refugees potentially streaming into South Africa.

Additionally, democratic governments throughout Africa will struggle in 2013 due to a combination of massive social and income inequalities and soaring unemployment. In particular, power struggles among the elite, including within ruling political parties, will likely intensify during the next 12 months in Nigeria, South Africa, Ghana, Senegal, South Sudan, Uganda, Egypt and Tunisia.

Conflicts tearing countries apart
Mali is already in a state of war, with the French army trying to reclaim northern territories seized last year by Islamist groups.  The conflict in eastern Democratic Republic of Congo also dominated UN Security Council deliberations on Africa last year, and is likely to continue until a decisive intervention by the international community.
In West Africa, Guinea-Bissau may degenerate into civil war, fuelled in large part by its alleged role as a major hub for international narcotics trafficking. Similarly, the Boko Haram Islamist insurgency in northern Nigeria will not go away until the central government either wins a decisive military victory or negotiates lasting peace.

The recent rebel insurgency in the Central African Republic may spawn similar movements in other countries, especially where central governments only have nominal control over large swaths of territory. In particular, the Somali government will continue to remain dependent on African Union troops.

Despite the drawbacks, Africa remains attractive to investors. Some countries have realised that it is time to start formally promoting their economy and attract investment to their shores. Congo is one such country who has not hesitated to seek the assistance of Mauritius to set up its Investment Promotion Agency. On the local side, Africa is also very high on the Mauritian agenda. The last Budget emphasised the Africa Strategy whilst the Board of Investment has even set up an Africa centre to provide information on the business opportunities arising on the continent.
Shaffick Hamuth

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