Emerging Powers and the Changing Landscape of Natural Resource

Governance in Africa

Jakkie Cilliers, Institute for Security Studies (www.issafrica.org).

Scope

• Much has been said so my focus is on the nature of current growth in Africa and future trends.

• Some remarks about global demand for commodities

Ernst & Young 2013 Africa Attractiveness Report

• “The growth opportunities in Africa are increasingly evident… Africa presents a significant opportunity across multiple sectors with US$2.6 trillion of revenue expected by 2020 across resources, agriculture, consumer and infrastructure, of which US$1.4 trillion will in consumer industries alone. The rapid emergence of a middle class, already equal in size to India, makes consumption a major driver of economic growth across the region, and is one of the most interesting yet less explored opportunities across Africa.”(p 3) ” … despite perceptions to the contrary, less than one-third of Africa’s growth has come from natural resources. The rest has come from a range of other sectors, including agriculture, manufacturing, construction, and, in particular, services.” (p 4)

Source: Ernst & Young’s attractiveness survey Africa 2013 Getting down to business p 3 available at http://www.ey.com/Publication/vwLUAssets/ The_Africa_Attractiveness_Survey_2013/$FILE/Africa_Attractiveness_Survey_2013_AU1582.pdf

SSA: Contributions to GDP

Source: Ernst & Young’s attractiveness survey Africa 2013 Getting down to business p 3 available at http://www.ey.com/Publication/vwLUAssets/ The_Africa_Attractiveness_Survey_2013/$FILE/Africa_Attractiveness_Survey_2013_AU1582.pdf

Reasons for African growth

1. Population growth and urbanization

2. Responsible macroeconomic management and reform

3. Improved agricultural output and industrial management

4. Relatively stable political frameworks

5. More effective aid, targeted debt relief & increased domestic revenues

6. Growth in remittances and foreign investment

7. Global economic growth - demand from China in particular but also India, Brazil and others

8. Commodities boom 5

2012 from Ernst & Young

• Investment flows to Africa fell last year but still up 13% since 2007. Africa now gets 5,6% of global FDI flows

• South Africa largest 2012 investor in Africa, mostly in service sector although EU & China larger in value terms “helping to reduce reliance on natural resources” Mostly banking, telecommunications & retail by MTN, Standard Bank, Shoprite, Sanlam, Tiger Brands and Nampak

• Also strong growth from UK, China, India, Japan and UAE • In 2012 Africa seen as most attractive investment

destination (by region) – existing investors more positive

Africa’s trade partners, 2011

Source: Simon Freemantle, Intra-African trade: challenging, and critical, Standard Bank, Johannesburg, 19th April 2013, p 2.

Trade patterns: 2001 to 2011

• China-Africa trade: 1 510 % growth. Around $200 bn for 2012 compared to $166bn in 2011. Kenya, Egypt, Nigeria and South Africa account for half of China’s exports to Africa.

• Intra-Africa trade: 410 % growth. Very low 9% to 12 % - largely as a result of non-tariff barriers such as corruption as well as lack of infrastructure. Most consists of unrefined crude oil from oil exporters to countries with refineries (such as from Nigeria to Ghana) for onward export to non-African destinations.

• US-Africa trade: 225 % growth • EU-Africa trade: 190 % growth

Africa’s exports by type, 2011

Source: Simon Freemantle, Intra-African trade: challenging, and critical, Standard Bank, Johannesburg, 19th April 2013, p 2.

Conclusion

• Longer-term growth prospects?

• Implications of the fracking revolution?

Recent growth

Source: Ernst & Young’s attractiveness survey Africa 2013 Getting down to business p 3 available at http://www.ey.com/Publication/vwLUAssets/ The_Africa_Attractiveness_Survey_2013/$FILE/Africa_Attractiveness_Survey_2013_AU1582.pdf

Global growth – history and forecast (bn 2005 USD)

Source: IFs version 6.69, Base Case forecast

Sources of global growth

Source: IFs version 6.69, Base Case forecast

Working age – millions of people

15 to 65 years of age

By 2032 Africa will have a larger working

population than China and, by 2036 a

larger worker population than India

Global Transformation: GDP at Purchasing Power Parity

By mid-century the emerging countries will have emerged

• China overtakes EU27 in 2021 and USA in 2024

• India overtakes EU27 in 2047

2010 GDP pppy in Africa around $900 (PPP).

By 2030 estimate $1 760 pppy.

The Economic Growth of Africa GDP at PPP:

A transformation underway towards higher income

A common threshold for “middle class” is $7,500

North

East

Central

South

West

2030 - Africa

2030 - India 2030 - China

2030 - USA

Energy & Consumption

• BP - 93% of the energy consumption growth is in non-OECD countries, accounting for 65% of world consumption by 2030. US shortly becoming a net energy exporter rather than an importer and its demand for West African crude is falling very rapidly although other consumer countries, including China are taking up the available supply.

• Should China invest in shale gas to the same extent as the US and be able to ramp up its shale technology (particularly coal bed methane that is found in its large coal deposits), the results could be far-reaching, including for Africa. USA, Canada, China could emerge as a large natural gas exporters. As a result global energy prices would moderate, which would in turn increase energy consumption globally and therefore carbon emissions.

Thank you!

Source: IFs version 6.69, Base Case forecast