Thursday, 27 August 2015

Cementing the future

Hats off to Nigerian magnate Aliko Dangote. Amid global panic about China's imploding stock market and the plunge in the price of oil, Nigeria's top export, Dangote chooses to announce a US$4.3 billion joint venture with China's Sinoma to build cement plants in eight African countries. Dangote always knows exactly what the markets are doing, so his timing is likely to have been deliberate. Like China, Dangote is playing the long game. Neither side wants to put their plans on hold because of the current market crisis.

Confidently predicting that all the new factories will be operating within two and half years with a production of capacity of 70 million tonnes a year, Dangote says he will add a further 30 mn. tonnes by 2020. Dangote wants to challenge France's Lafarge cement conglomerate for market supremacy within and beyond Africa.

Although Nigeria's growth rate has slumped to 2.4%, and Beijing's economic restructuring is hitting turbulent waters, there is a logic to Dangote's big China deal. Cement is a bet on the dynamism of Africa's internal market: that regardless of commodity and share price roller-coasters, demand from the world's fastest growing population for new houses, offices and factories is set to outstrip supply for years to come. It also looks like the next stage in China-Africa relations – joint-ventures for manufacturing companies that will play a leading role in modernising African economies and weaning the continent from its dependence on primary commodities.

Tuesday, 11 August 2015

Many challenges ahead

With a cluster of key economic meetings stretched out in the last quarter of the year, Africa’s economic policymakers are grappling with two main challenges: rising youth unemployment and the falling prices of export commodities. The first two meetings – the United Nations summit on Sustainable Development Goals in New York in mid-September and the World Bank and International Monetary Fund annual meetings in October – will address those topics head on. The third meeting, the Climate Change conference in Paris in December, will address the issues more obliquely in terms of the damage that desertification and extreme weather are doing to Africa.

For jobs and export revenues to become such pressing concerns for Africa’s governments, especially those in charge of the bigger economies such as Nigeria, South Africa, Egypt and Kenya, is not to ignore the past 15 years of impressive growth on the continent but to point to changing regional and international dynamics. The tempo and direction of China’s economy is changing and its appetite for raw materials diminishing. In the longer term China will want to buy more processed goods from Africa. How far African economies can take advantage of those trends will depend on both on technical skills and availability of cheap and reliable power and transport links. But for state budgets and jobseekers the lessons are clear: the commodity boom is over, probably for another decade.