Africa is not open for business

Eugene Brink writes on the continent's bleak economic prospects

Africa is not open for business – and it’s sad

23 February 2021

COVID-19 and all its accoutrements have wreaked havoc on the global and individual economies. Africa is no exception, even though the pandemic itself has ostensibly not struck the continent as hard as the West, Latin-America or Asia.

While some economies on the continent were chugging along quite nicely before the pandemic, the impact of COVID-19 (especially on the rest of the world) has hit exports and growth hard. The International Monetary Fund (IMF) has estimated that the continent’s economy will shrink by 3% or more in 2020.

Small, poor countries – or even big ones – that are reliant on one or two resources have been acutely affected. Whether they depend on oil – like Nigeria – or tourism – such as South Africa or the Seychelles – African countries have suffered and continue to suffer in the wake of lockdowns and successive COVID-19 waves.

For the poorest continent on earth this is obviously not good news. African countries have some of the most resilient people on the planet, but African economies – always penurious and struggling – will not bounce back with a bang, unlike the more buoyant and robust economies of China and the US. It’s estimated that the economic gains of the last several years will be wiped out by the effect of COVID-19.

And yet, to blame it all (especially the lack of rebound) on COVID-19 would be missing the point. Even before the pandemic struck, many African countries’ economic prospects looked bleak. Zambia, South Africa and Nigeria are reeling from pre-COVID troubles exacerbated by COVID-19 and its attendant effects.

Viewed broadly, Africa is a good destination to invest in. It has some fast-growing economies, a young and vibrant population, and therefore hundreds of millions of consumers. But something seems to be amiss, and that something seems to be the fact that Africa, for many reasons, is closed for business. It may not be boisterously and conspicuously announced, but the actions of its political class speak louder than any words ever can.

If this wasn’t the case, businesses (including South African ones) would not have sold or simply terminated their operations in other African countries. Shoprite’s stores in 14 African countries (excluding South Africa) have showed paltry gains during 2020 even as turnover in South Africa seemed to have risen strongly.

Nigeria is by far Africa’s most populous country and has a promising youthful population. It seems like the perfect place to do business; it’s just that it is not. Woolworths, The Foschini Group, Clover and Shoprite have all ceased their operations in this West-African giant or are busy doing so. Oil companies will be able to write voluminous tomes on their ordeals in Nigeria. A laundry list of factors accounts for this: corruption, challenges relating to doing business, political meddling, an undiversified economy, deficient consumer spending.

The lowest positions on the World Bank’s Ease of Doing Business Indices are perennially mostly occupied by African countries such as the Democratic Republic of Congo, the Central African Republic, South Sudan, Somalia, Eritrea and the intractable Libya. These are the same countries that are at the bottom of indices about failed states, education, corruption and human development.

African countries are notoriously corrupt, and although South Africa’s institutions are a continental exception and President Cyril Ramaphosa sententiously admits to the egregious corruption in the country (more than we can say of virtually any other African leader), public sector corruption continues unabated and Ramaphosa is helpless to stop it.

The spectre of poor leadership and a lack of accountability have haunted Africa for decades. Truth and candid self-examination are among the victims of these deficiencies. Former President Jacob Zuma’s public tirades and invective levelled against the Zondo commission and Judge Raymond Zondo in particular, and his willingness to go to prison instead of appearing before it to simply tell his side of the state capture story, are the seeds and key elements of Africa’s failure.

His contention that a black government is targeting him as an individual (in a black-majority country) is devoid of any proof and a risible attempt to play both the race and the victim card while everything else suggests he has a lot to answer for. The harrowing part is how much support he still musters and how many people, in the face of compelling evidence of wrongdoing, still believe he has done nothing wrong

Zuma’s situation is, however, unique in Africa. Many African leaders escape scot-free after plundering the state coffers and resources and impoverishing their populace. There is no prosecution for crimes, and even the most larcenous and murderous ones go completely unpunished. There are no Zondo commissions, no court cases, no jail time – and so the cycle of impunity continues.

The Economist recently devoted ample space to the issue of Africa’s long and arduous recovery. “Africans have shown remarkable resilience in response to the virus. But the toughest years are yet to come,” it presciently remarked. The newspaper lamented the doleful state of education (especially for girls) on the continent and other economic challenges, but as expected no “honest deep digging” is done on the real causes and solutions.

Debt relief and restructuring, and further cheap loans, are the only solutions offered. Moreover, the African Development Bank’s proposals to lure more private capital will work only if the above-mentioned issues are addressed and Africa proves itself a continent worth investing in.

Before COVID-19 is blamed for the mess Africa’s continental and individual economies are in, and before rich countries pile in with more aid to salve their consciences and Ramaphosa delivers even more cant on inclusive growth, these facts must be borne in mind. Africa is not open for business and this is unlikely to change in the foreseeable future. It is a sad state of affairs that too often escapes honest scrutiny. The flip side is that communities and individuals can and must take hold of their own futures.

Eugene Brink is Strategic Adviser for Community Affairs at AfriForum.