Taking African growth to the next level
24 January 2013
Developments in infrastructure both physical and financial, and deeper economic integration, will be key to sustained growth in Africa, according to a panel of business and political leaders brought together by Brand South Africa at the World Economic Forum's (WEF's) annual meeting in Davos, Switzerland on Wednesday.
Hosted in partnership with CNBC Africa and Forbes Africa magazine, the discussion centred on Africa's "resilient dynamism" - the theme of this year's annual meeting - and featured a keynote address from South African Finance Pravin Gordhan, with a panel featuring Trade and Industry Minister Rob Davies, Absa CEO Maria Ramos and Transnet CEO Brian Molefe.
The panel was extremely optimistic about Africa's future. While the United States and Europe battle political gridlock and mounting debt, and global growth continues to stagnate as economic powerhouses like China seek to avoid a hard landing, Africa has remained one of the few bright spots for economic activity.
The continent saw growth of more than 5 percent in 2012 and is projected to see the same in 2013, according to the International Monetary Fund (IMF).
"In a world that is troubled with slow or no growth, which is struggling with the impact of unemployment, both business and government have serious challenges ahead," Gordhan said in his address.
"Collectively, we must balance the need for short-term solutions to immediate challenges, while making a long-term commitment to sustainable growth and implementing a sound political and economic framework."
Africa, and South Africa in particular, are clear embodiments of this year's Davos theme, showing resilience in the face of a challenging global economic climate. South Africa has ranked in the WEF Global Competitiveness Index (GCI) as being among the best places in the world for corporate governance, regulation of the financial system and availability of financial services.
Deepening economic integration
Davies highlighted the need for African countries to not just broaden their economic and trade ties, but to deepen their relationships - something he said was being achieved through the development of a free trade area covering 26 countries on the continent.
Davies said the absence of sovereign debt crises, alongside better governance across the continent, had gone a long way to creating an environment where African investments saw long-term growth and returns capable of creating sustained development across the continent.
However, he stressed the need to ensure that industrialisation benefited all Africans, and cautioned against becoming over-reliant on mineral resources.
While existing infrastructure was developed in large part for - and still largely supports - the mining industry, Davies said that long-term growth strategies had to reach further. For growth, he said, there had to be investment in financial, energy, and technology infrastructure just as there was for the extractive industries.
Both Ramos and Molefe agreed that infrastructure development created opportunities for both investors and the African people, with more than 80 percent of Africans remaining unbanked and 70 percent without access to internet.
Molefe, who is spearheading South African state company Transnet's US$300-billion investment in infrastructure projects, said that innovation in financial services and ICT created huge potential for Africans.
According to Molefe, the globalisation of the retail finance market, and the increasing use and availability of products such as bonds and mortgages, was helping to unlock value and capital, creating liquidity across all levels of the market.
At Absa, Ramos said she was seeing a significant increase in infrastructure funding, adding that she was particularly encouraged that more deals were being financed in African capital markets.
However, she highlighted the need to keep innovating the financial services industry in Africa, to talk more about financial infrastructure, and to create greater certainty in legal environments across the continent with regards to tariffs and financing.
Despite the resilience and dynamism currently being seeing across the continent, unemployment and labour market instability had to be tackled to sustain the growth of the African continent.
For Ramos, unemployment in particular was the global challenge of our time.
According to Davies, there was no "magic bullet" for unemployment, and job creation could not be seen as simply an incidental outcome of growth, but had to be targeted in its own right.
There had to be commitments from labour, business and the government to address practical matters and in particular youth unemployment, Gordhan said, with training and skills development being critical.
Closing Wednesday's event, Brand South Africa CEO Miller Matola said: "We often forget to highlight the positives we've achieved. South Africa is a well-established democracy, the continent is emerging from the global economic crisis well-positioned for growth, and we have a solid, stable fiscal environment.
"It is all too easy to lose sight of what's good, and to just focus on what is not good," Matola said. "Our task is to demonstrate that we not only acknowledge the challenges we face, but that we are responding to them in a dynamic and innovative way through our National Development Plan and infrastructure build programme."
Source: Brand South Africa