African Outlook. Frontier Advisory Conference

What is the outlook for Africa? ZA Confidential listened to three experts this morning at Frontier Advisory’s Africa Outlook Conference 2014 in Sandton, and here is brief summary of their thinking:

Frontier Advisory CEO Martyn Davies:
The golden decade of growth in Africa has passed. The China- driven commodity cycle is not what it was a few years ago. The growth model needs re-thinking – we need economic diversification. We need more companies. A country without companies is not a successful society. Is Africa the next Asia? Does the Africa nation state have a future? There are political and economic failures due to failure of leadership to create nation states. Companies that are first movers will be the winners. The most successful companies take advantage of less competitive environments, and create sustainable businesses. Examples include Naspers, Shoprite, SAB Miller.

Sim Tshabalala, joint CEO Standard Bank:
We at Standard Bank remain very bullish about the African Continent. SA should get back to 3% growth by end of this year. The NDP will provide greater policy certainty. Offshore gas will boost GDP. A 5 percent growth rate is not in the realms of the impossible by 2015. It is crucial South Africans guard against arrogance in dealings with the rest of the Continent. We have a lot to learn from our northern neighbours, and we need them more than they need us. It seems likely the era of steep commodity prices has come to an end. The trend is strongly upward in inter-regional trade. But there is far too much red tape and corruption. There is a great deal of money to be made in African banking. The IT revolution in Africa is all about mobile banking. It spurs economic activity. And we are still only at the start of the banking explosion. Retail banking will be transformed from branch-based banking to a (banking service) carried in your pocket. The new opportunity in
retail banking in Africa is due to what is happening with mobile. But there are 6 very significant challenges we need to tackle head on:
* European contagion: could drag Africa’s growth slower.
* Cyber-crime: is significant: banks lose as much of 5% of their revenue to cyber-crime. African banks are going to have to spend a great deal of money combatting this threat.
* Regulation and regulatory cost: most African banks hold more capital than global regulations require. Obliging African banks to de-risk further is perverse. This may create unfair advantages for banks headquartered in developed world.
* Diverse needs of a rapidly expanding continent: such as credit to micro enterprises and SMEs. The shift from cash-based to card based requires financial literacy and education.
* Political and social and economic rights: need to become more universal .A key element is zero tolerance for corruption. Corruption raises the costs of doing business. It is the very opposite of victimless crime – it hurts all of us.

Jay Naidoo: Global Alliance for Improved Nutrition (GAIN):
How are South Africans seen on the Continent? People don’t like us. In our history we have been a part of Europe rather than part of Africa. We have tended to upset a lot of people. An example is how we put forward our candidate as leader of AU – in the past this post has tended to be (filled) from smaller countries. How much longer are we going to be the dominant economic power in Africa? Nigeria will overtake us. By 2050 one in four African is going to be Nigerian. In SA there is an obscene disparity in wealth, and in our Continent. We need growth to provide opportunities for people to leave poverty, or it will explode in our faces. We haven’t understood the impact of the technological revolution. We have had a revolution in the last few decades. There are now close to 800 m mobile phones in Africa. This demonstrates we can do something across the Continent that is revolutionary. Once you have a platform of ICT, people will use it to deliver other things. Like
mobile money. The pre-paid card enabled the revolution. What are the other assets in Africa? We are able even to skip over the PC age – from mobile phones to mobile broadband, with Africa being at the cutting edge of that. By 2050 there will be 2 bn people on this Continent – one quarter of working age population of the world. By the end of this century half of people of working age will be African. That is a democratic dividend. How do we leverage these assets? If we don’t get these people out of poverty, it will become a democratic nightmare. I see a lot of anger in the slums of Africa. One in 3 young people in sub-Saharan Africa lacks even the most basic skills. We have 60% of the remaining arable land in the world. Yet many children are malnourished. The cost of solving malnutrition is miniscule compared to the costs that society pays much more later in life. When you look at university graduates, only two % specialise in agriculture. (On
corruption) Bribing – why are we afraid to challenge this abuse of power? Mo Ibrahim built up a telecommunications network in Africa without paying a single bribe. Why can’t you all do that? It’s about transparency and governance. The gap between the poor and rich hasn’t improved. That’s a worry for us. If you live in a bad neighbourhood (as a country) you are going to have trouble. It matters to us what happens in Zimbabwe or Swaziland or Somalia or the DRC or Cote d’Ivoire. Some things are improving, but certain things are declining. Africa still has 54 separate economies and countries. That weakens our bargaining position. How do we leverage our assets and build our bargaining power? How do we build integration and infrastructure to facilitate economic development, or we will remain underdeveloped and very poor? It is worrying there are consistent attacks on institutions that are there to protect citizens. We need an independent media to uphold the rights of
citizens. We need an independent and robust civil society. We should reclaim the essence of what Mandela stood for. The essence of Mandela is about human rights, integrity, and service.

Tweets of the Day:
Awkward Posts (@awkwardposts): They say so many people die because of alcohol. They never realized how many of them are born because of it.
Tom O’Halloran (@TPO_Hisself): Did you hear? They took the word gullible out of the dictionary!
Funny Tweets (@iQuoteComedy): Neil Armstrong lands on the moon: 5 pictures. Girl goes to Starbucks: 47 pictures.

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