Africa has a far deeper story to tell than simple linear growth rate fluctuations. Nuances and differences across the continent are like nowhere else in the world. Apart from its divergent nature, the issues that are driving change in Africa will have significant repercussions in 2019 and well into the immediate future.
The single most important factor that is likely to shape the continent this year is political change and the associated risk that comes with it. Rising authoritarianism and populist regimes alongside ageing presidents and political protests have a profound and lasting impact on the continent.
The Economic Intelligence Unit’s 2018 Democracy Index, which reviews the state of democracy worldwide for 167 countries, classifies half of the 44 Sub-Saharan African countries measured as authoritarian regimes, 14 as hybrid regimes, seven as flawed democracies and only one, Mauritius, as a full democracy. These results paint a clear picture of creeping authoritarianism and democratic backsliding, which Africa cannot afford at this stage in its development.
Against this backdrop, voting across the continent in 2019 will take place amid growing discontent among the youth – those who are under 25 years old and represent 60% of the continent’s 1.29 billion people – over poor service delivery and the lack of opportunities in countries long dominated by ageing despots.
According to Brookings, the age gap between the region’s population and its leaders is 42 years, compared to only 12 years for advanced nations within the Organisation for Economic Co-operation and Development (OECD). A disconnect between old leaders and institutions, and their rapidly growing, youthful populations, presents a fundamental challenge. This is particularly true in the era of Industry 4.0 where demands and requirements are changing, and ageing leaders are unable to take any meaningful action to address the issues most relevant to modern lives.
What does this mean for Africa’s investors?
Politics has an undeniable impact on business and economic confidence in Africa, as it does in most other parts of the world. In the context of Africa, these are inextricably intertwined and are the main drivers and shapers of context and society. Countless examples and empirical data show that strong political institutions are paramount to economic success. Political risk is an impediment to business, undermining confidence and accruing direct costs over an extended period of time. What is more, the role of business in establishing a stable environment with sustainable development across the continent is crucial. This has emerged as a pivotal part of business strategy and operations, and is defining a new breed of African firms that are globally competitive and locally impactful.
The rise of African MNCs, with a deeper purpose, bodes well for the future of the continent. While governments need to work harder to provide an environment fit for business and attractive to investors, it will be home-grown African firms that have emerged in spite of high risk and political uncertainty, with a deep contextual understanding and appreciation, that will be the true drivers of change across the continent.
Prof Lyal White is the Senior Director of the Johannesburg Business School (JBS) at the University of Johannesburg. He writes and advises on strategic thinking, execution and political economy in Africa, Asia and Latin America which is relevant to business and policymakers.