Ayanda Mdluli
While some analysts have warned that the political and social unrest in Tunisia and Egypt could spread into Sub-Saharan Africa, along with investment and economic implications, others have contended that, the Egyptian and Tunisian contagion is unlikely to spill over into Sub Saharan Africa.
One of the most significant discussions at the Frontier advisory Africa outlook for 2011 at the Johannesburg Stock Exchange recently was the possibility of a knock on effect of the Egyptian and Tunisian crises to the rest of the Sub Sahara.
Some key points to understanding the unrest in Tunisia and Egypt, can be found in the argument that the global financial crisis has had a delayed effect in both countries, with sever economic and political consequences. The revolts were driven by difficult economic circumstances, largely as a result of a massive drop in foreign investments and the cutting of foreign aid by European countries.
Reports from Bloomberg show that Egyptian governments inability to bolster economic growth over the past two decades fuelled the fire of social unrest. Bloomberg notes that the chart of the day shows Egypt as the worst performer among 13 middle eastern, north African and Gulf Countries in terms of per capita gross domestic product growth.
In addition, Bloomberg highlights: “Egypt’s average GDP per capita was a little changes at $2, 160 in 2009, compared with $2, 155 in 1989.”
These figures show that the growing economy is not trickling down to the lower mass of Egyptians, coupled with high unemployment, high inflation and the global financial crisis, says the Bloomberg report.
William Gumede, an associate professor from the graduate school of public development and management at Wits University in Johannesburg said the cutting of foreign aid from the West to some African countries has had a ripple effect on finance for development purposes and NGO’s which are often critical in the fight against poverty.
He explains that both Tunisia and Egypt had good access to Europe during the times of economic prosperity, where trade and investment had ensured economic stability for both African countries. However, now that Europe is struggling, coupled with sever cash shortages to North Africa, the revolts are a direct consequence and a delayed effect of the global economic meltdown.
Gumede argues that this could have a domino effect throughout North Africa and even spread through Sub Saharan, and further claims that the dilapidated structures of the New Partnership for African Development (Nepad) and the African Union could also have a negative impact on Africa’s political and economic standing in the global arena. He says that throughout the continent, many political initiatives are in disarray.
“We have a situation where African leaders in the mid 90’s had developed a new way of doing business with the changing economy by introducing Nepad, today there is no new way of doing things. We have an older generation of political leaders who don’t have the tools to deal with what is going on. There is no new generation of leaders. The world has changed but the leaders have not,” he says.
He continued to argue that people on the ground were looking for leadership which was consistent with the times and modernisation of society and the economy.
African leaders recently appointed the infamous Equatorial Guinea dictator, President Teodoro Obiang as the chairman of the African Union, which has ironically sworn to uphold the values and principles of democracy and human rights on the African continent.
According to some human rights organisations, the president of this oil rich nation has amassed massive wealth for himself, his families and his cronies, while his people live under squalid conditions in the depths of poverty.
The politics of patronage has always been an intrinsic aspect of African politics and economics, where businesses flourish and benefit in times of turmoil, usually at the expense of ordinary citizens and the poor.
Businesses in various sectors such as mining and arms manufacturing have strived on the blood of society, especially in countries such as Sierra Leone, Uganda, Liberia and the Democratic Republic of the Congo.
Gumede says businesses should take a more socio economic stance because they can produce African leaders with a modern vision. “ If businesses helped the communities, and provided talented people with opportunities. Then that community will protect the business.”
The head of asset management at Imara, John Legat, dismisses claims that Tunisia and Egypt’s contagion could spread in through Sub Saharan Africa. He bases his argument on the notion that there is relatively low risk of Egyptians contagion affecting equity values in Sub Saharan Africa, even Middle East and North African equity markets fell by 20% due to the unrest in Tunisia and Egypt. In addition, the Egyptian stock exchange was closed on January 30 and the Cairo market fell by 21 percent before share trading was suspended.
He says that this view is based on the Botswana registered Imara, a merchant banking and investment management group that markets several Africa – focused investment funds “while maintaining strong-on the ground representation in African jurisdictions.”
In his observations, he notes that “Sub-Saharan markets, excluding South Africa, generally have low correlation with one another and with the major international economies.”
He continues to add that political risk has always been considered in Egypt, noting that in the past, “this factor may have been under-estimated by some investors. This underlines the advisability of position-taking in a range of markets when creating a general portfolio with an African focus.”
In contrast, George Lwanda, a project economist from the Development Bank of Southern Africa disagrees with Legats views and points out that ripple effects of the crisis in Egypt can be seen on the weakening rand which is sitting uneasily with investors. He says that investors are becoming increasingly risk averse and have a tendency of looking at Africa as one country, which is putting pressure on Sub Saharan Africa.
He also points out that the rising costs of electricity, weaker rand and oil expenses could be linked with the riots, which could also see inflation rising and ultimately an increase in interest rates.
He continues to argue that that Egypt is the main economy in Comesa which consists of 23 different countries. The effect that this could have on Egypt’s trading abilities could be immense, which could have a direct knock on effect to the other member nations which are a part of Comesa.
“Egypt was identified as one of the main countries to invest in, its difficult to see how this could not have a negative economic impact on the rest of Sub Saharan Africa.”
He further contends that an economic problem, transformed into a political problem in Egypt, and pointed out that in comparison to South Africa, unrests of this nature can only happen on local government level because there is no tight dictatorial grip in the country.
He further claims that the shape in which Egypt will emerge from the crisis will have implications on the rest of Africa, especially if there is no visionary leader to steer Egypt into the right direction.
Through the experiences of Egypt and Tunisia, the toppling of the old undemocratic guard is inevitable. A growing number of unemployed youth and frustrated graduates who did not experience the liberation struggle will set the direction and pave the way for political development and modernization of leadership.
Old rhetoric and aid dependency has no place in the age of new media and the quest for freedom. The disorganization and irrelevance of the African Union has all but sealed the fate of “dictator clubs” which have come to characterize political leadership in Africa.
The minimalist approach to democracy in Africa will continue to be an impediment to the continents development. Instead of moving beyond mere electorlaism. These dictators and presidents for life have continued to conduct artificial elections for the benefits of aid ties, while others have suppressed political opponents clinging to power no matter what the consequences.
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