Africa Forum Report 2016 Contents The dawn of a new Africa? 4 Transforming African economies 11 Power on and power up: 16 solving Africa’s energy crisis Solving the infrastructure conundrum 20 The changing face of nance in Africa 24 African ntechs chart their own course 29 New horizons: future trends for 34 international arbitration in Africa Managing bribery and corruption 37 in Africa: it’s not as easy as ABC In summary… 41 3 Opening remarks Andrew Skipper, Partner and Head of Africa Over the last few months, a lot has been said about Africa’s future. The Africa Rising narrative has been challenged, with some pundits claiming this led to an overinflated bubble that has now burst. Or is the disruption from recent months’ activity the catalyst to drive change and innovation that will take Africa to its next industrial revolution? Who is right – and if you are looking to invest in Africa for the first time, what should you believe? At the 2016 Hogan Lovells Africa and it needs an open and business- We’d like to say a huge thank you to Forum, we wanted to take an friendly environment to attract all our guest speakers and we look honest look at what is happening investment, without which none of forward to seeing you at our London on the ground, hearing from those the above can be fulfilled. and Johannesburg Africa Forums who are at the heart of business in 2017. Overall the outlook is positive. There on the continent. What they had is no surprise in acknowledging that Best regards to say was both enlightening and Africa is a mid-long term play, but Andrew Skipper reassuring. Many governments are from this forum it is true to say that trying to shift the focus away from some industries are being thrust traditional exports such as oil and into the limelight creating more commodities, angling for more immediate, short-term opportunities investment into the manufacturing for those who can respond and and agribusiness, whilst technology adapt quickly. The answer may not is continually changing the economic be whether Africa is rising, but like landscape creating a budding army most emerging markets it’s about of entrepreneurs, and the regulators realising where the opportunities are are struggling to keep up. But, and positioning yourself at the right ultimately, even with all the change time. Regardless of where you may happening, Africa still needs a stable be in your business strategy on the power supply; it needs roads to get continent, one thing is sure, Africa products and produce from A to B; has something for everybody. 4 Hogan Lovells The dawn of a new Africa? Donald Kaberuka, 7th President, African Development Bank (2005-2015) Firstly, I regret I was not able Ever since the apparent end of the More than just minerals to deliver this presentation in commodity super-cycle, a narrative While the strong export growth person at the Hogan Lovells about Africa has become fashionable of the last decade has contributed which has been reduced to the Africa Forum in June 2016. significantly to sustained economic macroeconomic implications of the growth, the reality is that such Secondly, as this is a topic lower oil or mineral prices, and the I am particularly passionate growth in resource-rich countries, impact on the real sector as a whole. though strong, has often been about, I wanted to use this As the story goes, this would mark the very volatile. report to share my views, end of the ‘seven years of plenty’ and from the perspective of the so-called ‘Africa Rising’, or does it? In contrast, growth in non-resource ex-President of the African rich countries, which is the large It is, of course, true that the majority, has been steady, exceeded Development Bank, an headwinds in the global economy, population increase and is generally economist and a proud hardening of borrowing terms and more sustained. Indeed, some of African, of how disruption is other shocks, both internal and the fastest growing economies, creating a pathway for much external, are negatively affecting Ethiopia, Côte d’Ivoire, and Rwanda needed innovation and resource-rich countries. are not endowed with oil, gas or reform across the continent. But a close observation of the facts minerals. In this second category would rather point to another of countries, the role of both public direction, beyond the short term and private investment, greater macroeconomic issues that consumer demand and increase require dwweft management; the in regional trade, have been key. longer term prospects for African economies remain robust provided the countervailing policy stances are right and a number of longer-term structural issues are continuously addressed. Africa is, of course, a mosaic of 54 countries, with many similarities but also large differences. Africa Forum Report 2016 Securing the gains During the first 15 years of the new millennium, not only did Africa turn a corner but it turned out to be much more resilient than expected. Many economies were able to recover quickly from global shocks whilst the rest of the world struggled. Now, however, the continent must deploy all the solutions in the toolbox not only to safeguard the gains of years of reforms, but also to deal with both old and emerging problems. So, first things first; securing the gains. 6 Hogan Lovells Effective policy Investing now in the youth The first thing to do is to anchor The second element of safeguarding policy predictability and sound achievements of recent years is to Beyond the short term countercyclical macroeconomic address issues around inclusion, macroeconomic issues policies. The continent’s inequalities and jobs, especially for that require dwweft policymakers have a lot of the young. experience, having navigated over management; the This is not to underestimate the two decades of economic reforms longer term prospects policy challenges that this entails, and structural adjustment in the neither to ignore the global nature of for African economies 1980s and 1990s. The necessary the problem. It is only to emphasize remain robust. fiscal and monetary policies that the fact that all policy approaches assure stability with flexibility are from education, agriculture, small well known. Overvalued currencies businesses, gender and access to do not benefit the poor; on the financial services must be viewed contrary, they create opportunities through this lens. That takes time for rent-seekers. How to craft but clear plans are imperative. fiscally friendly and socially effective safety nets and targeted subsidies is technically not too difficult. It is the politics of vested interests that must be challenged. In this spirit, it is absolutely vital that the independence of institutions such as Central Banks is respected both in law and in fact. In the same breath, it is vital to rebuild macroeconomic buffers by limiting deficits, borrowing wisely and avoiding all things that undermine the revenue base. It is important to emphasise this basic fact because, in recent months, the policy responses to global shocks and declining commodity prices have sometimes gone in the opposite direction to these cardinal principles. Africa Forum Report 2016 7 Security and stability While the proximate cause of these These are familiar challenges This is indirectly related to the conflicts is not social discontent per to the people of Africa and her third challenge: peace, security se, there are groups which feed on leaders, which are difficult but not and stability. The 1990s were years pockets of deprivation, exclusion, insurmountable. Going forward, the of mayhem in large parts of the marginalisation, unemployment truly disruptive force that is at once Continent. The advent of the new and lack of opportunities. It is an opportunity or risk is around the millennium ushered in a period imperative, therefore, that in order demographic dynamics. when those conflicts began to to secure lasting stability and peace, wane, both in number of countries economic and social policies that involved and numbers of people drive towards cohesive inclusive affected. Of late however, without societies are not only fundamental even mentioning the failed state but they must be frontloaded. that is Somalia, we see, from South Sudan to the Central African Republic, signs of reversals. 8 Hogan Lovells Crystal ball 2. Urbanisation: over the next 3. Digitisation is already beginning In the next few decades Africa’s decade alone, an additional to provide businesses with 200 million Africans will move population will comprise four features, new opportunities such as to the cities and other urban online shopping, even drone all of which will fundamentally shape conglomerations, adding to the delivered medical products in the continent’s fortunes: 400 million who are already remote areas. We see today the 1. By 2034, Africa’s labour force urban dwellers. This will not only impact of greater digitisation will surpass that of both China affect consumption and demand in the leapfrogging in the and India. That work force will for all types of infrastructure and service delivery. This moves be younger, urban, digitally services, but also the economics beyond mobile money to connected and highly mobile. of agglomeration will in all health, education and public probabilities lead to a doubling service delivery. of productivity. 4. The high mobility of this emerging labour force will, if cross country obstacles in movements are relaxed, lead to a larger more diversified labour market across the continent. Africa Forum Report 2016 9 This is Africa (TIA) Although this presents new opportunities, we cannot ignore By 2034, Africa’s labour force will surpass that that this is Africa, with its own of both China and India. That work force will idiosyncrasies and rules, so it is be younger, urban, digitally connected and worth taking note that: highly mobile.