Africa’s Summit Weary Waver
The US joined Europe, China and Japan in hosting a bilateral government and business leader summit designed to deepen trade, investment and security ties despite portfolio wariness about standing favorites like Ghana, whose MSCI index plunged 25 percent through July as it reluctantly opened renewed IMF talks to restore fiscal and balance of payments health. The event was previewed during President Obama’s brief swing though the continent last summer, when he announced a push to extend the duty-free AGOA statute expiring in 2015 and to mobilize billions in official and private dollars to install electricity capacity under the medium-term Power Africa program coordinated by the Agency for International Development. The US Chamber of Commerce weighed in during the sessions with a task force report offering global context and policy and practical recommendations for comparative advantage. It noted that over $100 billion in annual infrastructure modernization generally is needed over the next decade beyond the scope of Washington targets, and that Chinese trade at over $200 billion in 2013 is already triple the total aided by exiting preferences which many American manufacturers seek to erode under AGOA’s next iteration. The mainland’s FDI is $20 billion and Premier Li on a recent visit vowed to expand it to $100 billion by 2020 with diversification from natural resources into high-growth consumer and financial services sectors. According to the Chamber Europe will also remain a paramount influence due to historic colonial and largest donor ties, as Brazil, and other big emerging economies also feature in the mix with technical assistance on energy and agriculture. Competing countries have active credit subsidy lines as the Ex-Im Bank is in danger of folding without congressional reauthorization, as Power Africa legislation also waits action. The organization suggests that public and private sector future focus on regional integration is a pressing gap despite the proliferation of formal groupings, where joint cross-border steps could address tariff and non-tariff barriers and infrastructure mega-projects. On capital markets, South Africa’s Investec collected membership views which acknowledged just small private equity and real-time securities reporting availability to date. Thirty formal stock exchanges have been launched, with recent ones in Cameroon, Seychelles and elsewhere with barely any listings. Fifteen bond markets exist but recent external sovereign issues in the billion-dollar range swamped local depth, the report added.
Islamic finance has also entered the landscape to tap Middle Eastern and Asian wealth with South Africa soon to follow Senegal in a debut sukuk. In North Africa placements from Egypt, Mauritania, Morocco and Tunisia are in the works and Gambia and Sudan have active local markets. According to experts fifty African banks are engaged in no-interest business including Barclays network in Eastern and Southern Africa. Standard Chartered estimates that sharia-compliant assets could reach one-tenth the total in places like Kenya and Tanzania, and previously “unbanked” populations in rural religious areas could become product followers, specialists believe.
