Political risk will remain a major concern for dealmakers in Africa in 2018. According to a recent report, Resourceful dealmaking: Outlook for M&A in Africa, published by Mergermarket in collaboration with specialist risk consultancy Control Risks, there has been a dramatic fall in M&A activity, with declines of 25 percent in volume and 26 percent in value in the first half of 2017, compared with a relatively buoyant 2016.
Imad Mesdoua, senior political risk consultant at Control Risks, comments: “The drop-off signifies growing investor anxiety surrounding governance issues and weaker economic signals across key African markets. Specifically, political risk and transparency concerns have become the principal obstacles to successful acquisition in Africa. Ethical and compliance considerations are another major factor clouding the outlook for potential investors.”
The report states political uncertainty and relatively weak economic fundamentals have negatively affected M&A activity in Africa. A fall-off in deals was seen in the first half of 2017 compared with a relatively buoyant 2016.
Political risk remains the key consideration for deal making in Africa
More strategic investment in Africa’s ports can accelerate growth and development by strengthening trade – PwC report
Africa needs to take advantage of the economic potential of its ports and shipping sector if it is to realize its growth ambitions. Globally, ports are gateways for 80 percent of merchandise trade by volume and 70 percent by value. Investment in ports and their related transport infrastructure to advance trade and promote overall economic development and growth is therefore vital – particularly in emerging economies that are currently under-served by modern transportation facilities.
However, port investment must be channeled appropriately to ensure financial sustainability and economic growth. Investment is not always about building new ports or terminals – investment spent on infrastructure without cognizance of the efficiency and effectiveness of the performance of the port may not produce the desired results.
Port performance must be seen in the context of not only port infrastructure shortfalls, but also the fact that port performance has a direct impact on the efficiency and reliability of the entire transport network in which the port is just a node for the transfer of goods.
These are among the key findings of an analysis of port development in sub-Saharan Africa (SSA) issued by PwC. The report, ‘Strengthening Africa’s gateways to trade’, was developed in response to the challenges facing SAA’s ports in attracting external investment and highlighting the regional economic and growth benefits thereof.
As an emerging market region endowed with vast resources and a growing population, SSA must accelerate its market access and trade across the region and with the rest of the world. PwC analysis shows that a 25 percent improvement in port performance could increase GDP by 2 percent, demonstrating the close relationship between port effectiveness and trade competitiveness.
With growing congestion in many African ports, Africa runs the risk of sacrificing further growth through lack of investment in port terminal infrastructure. Despite the high volumes of goods that require transport, the development and integration of ports in Africa’s wider logistic chains remains uneven.
ALTERNATIVE MONETARY SYSTEMS
That the current global monetary system is inherently deficient and needs a complete overhauling is no more in doubt, at least amongst critical thinkers. However, the empty suits or banksters for short, who have been instrumental in dismantling the productive segment of the global economy, in favor of rent seeking crony capitalism, might not agree. After all, it is they who created ‘fiat currency and ‘Fractional Reserve Banking’, which are at the root of, not only polarizing globalization, but also ecosystem destruction. See the article next column and others on page 28, 41, 44 & 46. The ongoing globalization that is promoted as if it were manna from heaven is on track to deliver the most polarized world humanity has ever seen. Thanks to the criminal enterprises of fiat money and fractional reserve banking, the 1% will soon own two thirds of global wealth!
The phony system of fiat money (money that is backed by nothing except the perpetual lies of states), which has removed even the slightest semblance of responsibility from the whole monetary equation, is probably on its last leg. A number of the core principles of ‘sound money’ are violated when ‘money’ is issued privately without any real backing. All the currencies we use in our daily lives are not backed by anything, except the words of the states and their accomplices, the notorious banksters. And we all know what that means! No wonder prudent people still hang on to precious metals, like gold, silver, etc. to preserve the value of their hard earned wealth, however meager that might be. These metals tend to hold their values or even appreciate over time vis-à-vis paper currencies. Other forms of investments (like real estate) are also used to hedge the continuous value-losing propositions of fiat currencies. The current vigorous initiative to replace paper currencies with crypto-currencies stem from this protracted problem of continuous printing of valueless papers. Inflation is one of the byproducts of the current global monetary system. Governments use inflation as a tool to bring down their (usually local) debts, but the effect on the unsuspecting sheeple has always been disastrous. When inflation becomes intolerable, riots and more, tend to be the order of the day!
Another of the foundational problems of modern finance is ‘Fractional Reserve Banking’. In a nutshell, it is pure scam, a fraud of grandiose proportion. As we never tire of repeating; ‘Fractional Reserve Banking’ is the biggest non-violent crime of the millennium, according to our holy book of honest money. The reason for this assertion is quite simple. When a bank creates money out of thin air and disburses this phony money as credit/debt into the larger economy (with interests), this very action dilutes the real money earned by labor, mental or physical (think those on salaries and wages, informal sector, etc.). It is this fraudulent act that is significantly contributing to the extreme polarization of the modern world system. By and large, the modern day wealth of the parasitic oligarchs is derived from this gimmick, not from actual tangible work! Amazon has never made a profit in its entire existence, but has managed to disrupt whole sectors of an economy. The US Mail loses about $1.50 for every package it delivers on behalf of Amazon. On the other hand, Amazon is expanding without bound (literally), and it is not because of organic growth. It is growing because it is allowed to leverage the easy money regime of global finance, so that it can buy out competitors, (potential and actual). Soon, it will end up becoming a monster that monopolizes all and sundry. May be then it might be interested in real moneymaking operations; ditto many of the giant tech firms (Tesla, Uber, Twitter, etc.)! Even the poorer countries of the world system have become quite adept at this financial contraption. Just look at our mini oligarchs, so-called ‘investors’. How did they come up with so much money without (hardly) ever lifting a finger? Billions and billions of birr is systemically transferred from the present and future earnings of the working stiff, (including genuine entrepreneurs) to the current cronies connected to TPTB (The Power That Be). State created oligarchs are now the movers and shakers of Ethiopia’s highly speculative and consumption-oriented modern sector. Henry Ford once said; if people only knew how banks create money, there will be a revolution tomorrow’!
The sheeple sweats and bleeds to secure its meager livelihood. What it earns is hard earned money. By continuously creating money out of thin air, banks are stealthy appropriating the real earnings of the sheeple. They might not acknowledge it yet, but they are digging their own graves, so to speak. What is holding back the masses from pouncing on banksters is the usual ‘bread and circus’ game. Even in those ‘rich’ countries, the number of people living below the poverty line has been on the increase since the 1970s. Of course, there are all sorts of statistics and lies to camouflage/hide the reality that obtains on the ground. By delivering ‘free’ food and plenty of ‘entertainment’, the sheeple is kept at bay. One would think the parasitic elites of our world system would take notice and try to ameliorate the situation. No, no, no! What they are actually doing is; they are doubling down on their old gimmickry. Don’t be surprised if major wars break out soon, after all, ‘all wars are bankers wars’!
Critical thinkers are proposing different systems of honest money to be used across the board. But dominant interests, including banksters, are fighting tooth and nail to thwart off any proposed change to the existing system. After all, current banking is ‘rent seeking’ par excellence! Many alternatives to the existing monetary system have been proposed throughout the years and decades. One is community issued money. Another is a system of money where credit is created only by the state, under very stringent conditions, like the ‘gold standard’, etc. Multiple currencies, even in a somewhat closed community, (a city, state, etc.,) have also been contemplated. Gladly, there are a number of people in the world who are actively engaged in trying to change the foundational principles of the existing system, with a view to replacing them with a more equitable and resilient alternatives. There are many pilot projects under experimentation in many countries of the world system!
Here is a word of wisdom from an old entrepreneur: “A business that makes nothing but money is a poor business.” Henry Ford. Good Day!
EU, China’s African development assistance
The interdependency between security and development makes China an important partner for the EU. China has also emerged as one of the major donors and loan providers for Africa. Traditionally, China’s aid has been oriented towards economic sectors and often involves large-scale infrastructure projects. But the need to protect Chinese investments and an estimated one million of its citizens living in Africa, including in the most fragile parts of the continent, are driving China’s growing role as a security provider. China has already emerged as the largest contributor of peacekeeping forces among the permanent members of the UN Security Council and is constructing its first overseas military base in Djibouti, for example.
Chinese and EU assistance programmes are driven by substantially different development paradigms. EU aid is based on horizontal programmes, relies on grants and direct budgetary support, aims at poverty alleviation and targets soft sectors such as healthcare, education and governance. China’s approach is based on projects, relies on a mix of concessionary and market-based lending and concentrates on high-growth sectors such as infrastructure and mining.
These differences notwithstanding, synergies exist between China’s focus on hard infrastructure and the EU’s approach of supporting capacity-building and improving framework conditions and business environments. Most critically, China offers additional resources to finance development initiatives and foster economic growth. Similarly, the narrowing gap between EU development assistance and security interests, as well as China’s growing security presence in Africa both hint at a growing prospect for cooperation on security matters.
Despite the obvious potential of trilateral collaboration between the EU, China and African countries in promoting stability and prosperity, a comprehensive assessment of China’s role on the continent also reveals limits to more substantial convergence of European and Chinese development assistance. The overlap between Chinese commercial and development agendas will be one of the key obstacles. This discrepancy is most apparent in the Ministry of Commerce’s leading role in setting the development agenda and the fact that the main aid implementation agency, China Exim Bank, has an overarching objective to support Chinese exporters.
These two institutions pursue commercial considerations even when cooperating on issues seemingly dedicated to the development agenda. For example, China has informally championed four domains for multilateral and bilateral development cooperation: healthcare, environment, education and infrastructure. While these areas offer great development potential, Chinese objectives are tailored to further commercial or industrial policies in these areas.
Not all Chinese investments have lived up to the promise of economic benefits for the recipient countries. Chinese aid tends to be tied to the use of Chinese contractors and goods, limiting the benefits to the local economy. China is facing increasing criticism in developing countries regarding the social, environmental and political impact of its policies. Lack of respect for social and environmental standards and the limited lo- cal employment opportunities generated by Chinese companies have led to backlashes from some African elites and publics. The conditions attached to China’s aid also often run counter to EU objectives of good governance, human rights, macro-economic stability and market-oriented reforms.
Restrictions also apply to China’s security involvement in Africa. To date, China has deployed its troops only within UN peacekeeping frameworks and in many cases avoided high-risk operations. While the scope of Chinese participation in these missions is increasing, so will regional pressure on China to commit its troops to conflict zones. Some Chinese economic investments may even directly fuel conflicts by worsening corruption, exacerbating local fault lines and creating disputes over water and land resources. Unreported and illegal Chinese fishing in the waters off the coast of Western Africa may contribute to the resurgence of piracy in the region. Moreover, China frequently used to provided concessional financing to Zimbabwe and Sudan, often circumventing Western sanction regimes.
Michal Makocki, a Senior Associate Fellow at the EU Institute of Security Studies (EUISS)stated that the EU’s development agenda is increasingly driven by security and migration concerns. In turn, China’s security engagement is motivated by the need to protect its fast-growing economic interests on the continent. This makes the EU’s and China’s starting points closer than in 2008, when the triangular cooperation was first suggested, given the importance of sustained high economic growth for Africa’s stability. Michal Makocki noted that extending the EU-China Dialogue on Security and Defence beyond military circles to include development agencies could facilitate better coordination of different aspects of bilateral cooperation.
China’s 2015 pledge to establish an 8,000-strong peacekeeping standby force offers an opportunity to cooperate in the training of troops. Military-to-military exchanges could also translate into spill-overs of greater transparency in arms transfers, better monitoring of their end-users and increased sensitivity to concerns about fomenting conflict through weapon sales. Disaster relief and humanitarian cooperation offer another potential avenue to build confidence in practice.
China’s development agenda has shown to be responsive to conditions on the ground. Rather than normative prescriptions, it will be local frameworks and structural constraints that will put China’s agenda on a more sustainable footing. Countries with strong governance systems, the rule of law and vibrant civil societies have been able to obtain better conditions from Chinese counterparts.
Jakob Bund, a Junior Analyst at the EU Institute of Security Studies (EUISS) stated that concerted efforts with the African Union to reinforce local frameworks for environmental protection, labour laws and open public procurement schemes can benefit all investors. Given its endeavours to strengthen good governance and support for institution and capacity building on the continent, the EU could seek to further harness oversight mechanisms that ensure transparency and accountability.
Additionally, According to Michal Makocki, the EU could appropriate grants to support local governments’feasibility studies for Chinese investments to better gauge their impact in terms of economic potential but also to better address potential negative externalities. The result would be sustainable economic growth and stability, two of the key factors for addressing the root causes of migration.
