Paul Clark, Portfolio Manager and Africa specialist at Ashburton Investments tell us what is different at the WEF for Africa this year.
Another year and another World Economic Forum for Africa, with many déjà vu’s from last year. However, the world’s outlook has changed significantly over the past 12 months. This time last year the Brent crude oil price was comfortably trading above US$60 per barrel and most commodity prices, although weaker, were stable.
By the middle of January 2016 Brent had fallen to about US$28 a barrel and copper had lost a further 25% off its low prices as global investor’s feared a collapse in China’s growth and concerns grew around emerging and frontier markets. In April 2016 the IMF downgraded its GDP growth forecasts globally, reducing its estimates of future growth across Africa by about 0.5% per annum over the next five years.
So, while we are seeing the usual themes of lack of infrastructure, combined with the need to unlock private funding and enable public private partnerships (PPPs) as well as the need to find unique solutions for each country’s specific requirements, the urgency to implement better policies and diversify economies has increased.
One of the additional concerns this year is the availability of foreign currency in key commodity exporters. Currency stability policies, and the resultant need to implement capital controls to protect foreign exchange reserves, have led to these shortages and this has further compromised the weak growth environment in those countries. A panellist commented on how the flexibility of the South African Rand has allowed that country to weather some particularly nasty storms late last year.
Of course foreign investors want some certainty about being able to exit their investments or repatriate dividends or interest in the future and these policies mean that many have not invested more in these economies or have even cancelled planned investments. Compared to last year, there are fewer Nigerian representatives on key panels, perhaps a sign of the issues currently facing that economy.
In conclusion, all the major themes and focus areas are much the same, but the urgency has increased to implement policies that will generate sustainable and inclusive growth for the continent.
Paul Clark is Portfolio Manager and Africa specialist at Ashburton Investments