MediaToday
Mark Lamb | Wednesday, 11 February 2009

United States of Africa

Weekly international investment round up to 10 February 2009

With the International Monetary Fund (IMF) now expecting weaker commodity prices and pressure on capital flows resulting from the global downturn to slow growth in sub-Saharan Africa from 5.4 per cent in 2008 to around 3.4 per cent in 2009, the renewed calls for a ‘United States of Africa’ which could serve to re-invigorate the financial future of the continent would seem well timed.
If successful, such a single market would collectively offer a stagnating world economy 900 million potential consumers, the creation of a single currency, one African military force and the right for its people to roam without any work or visa restrictions.
Surprisingly, the leading proponent of this vision is the leader of our near-neighbour, Libya’s Moammar el Gaddaffi. This question dominated proceedings at the latest African Union summit which was held in Addis Ababa and resulted in a typically African answer.
Resplendent in an orange agbada and wrap around sunglasses and flanked by extravagantly dressed African traditional leaders had Colonel Gaddaffi’s motion been passed the scene would have been quite a contrast from that of Thomas Jefferson at the United States Deceleration of Independence some 230 years ago.
Earlier Mr Gaddaffi had been elected Chairman of the African Union and used his inaugural address to push hard for a United Africa. However, his declaration that all African parliaments must consider his proposals for an African Union Government and unless two-thirds of them registered disagreement he would take their silence to mean acceptance appear to have antagonised more leaders then were actually drawn to his cause.
Several of the regions most important countries including the continents economic powerhouse South Africa favour following a more measured and slower path as they fear the existing proposal would just add another layer of unnecessary bureaucracy and would not result in any real economic integration, much to the frustration of the Libyan leader.
Amid disagreements on the issue of creating a ‘US of Africa’ a compromise was reached. It was agreed to change the name of the ‘AU Commission’ to the ‘AU Authority’ and that three months of consideration of the unity proposal would now follow, effectively putting the brakes on the plan for the time being.
For investors considering the longer term riches offered by Africa this latest ‘agreement’ could be seen as yet another example of Africa’s inability to tackle its own economic problems and as the harsh reality of reductions in foreign aid, lower commodity prices and a decline in global credit start to bite, those hard-won improvements to economic fundamentals which have enabled the first period of sustained growth in the region for decades could grind to a halt.
A more likely initial scenario is the strengthening of regional agreements such as the Southern African Development Community (SADC) which promotes freer trade between its fifteen member countries and as South Africa prepares to stage Africa’s first ever ‘FIFA World Cup’ next year these regional arrangements are likely to strengthen further and offer good investment opportunities.
Although a full union remains along way off it is certainly much more preferable than the current ‘Disunited States of Africa’.

Mark Lamb is Head of Life at Citadel Insurance plc which is authorised to carry on general and long term business of insurance under the Insurance Business Act, 1998 and is regulated by the MFSA. Contact by email; mlamb@citadelplc.com Tel; 25579000. Website; www.citadelplc.com
This article does not intend to give investment advice and its contents should not be construed as such. Information in this article has been obtained from various public sources and is given by way of information only. Readers are always encouraged to seek financial advice before making any investment decision.

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11 February 2009
ISSUE NO. 569

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