Pax Africana: How (South) Africa can forge its own economic destiny

Rahima Cassim, fund manager at Ashburton Investments.

South Africa is a country of tremendous promise. It’s a dynamic land with the potential for integrated prosperity. Sadly, in the recent past, the forces created by this dynamism have failed to live up to the country’s potential. Rather than focusing inwards, many now believe South Africa’s secret to success may require looking outwards, to Africa.

As apartheid polarised South Africa and its inhabitants, it produced an insulated breeding ground for businesses to grow in order to supply the country with products and services which were made inaccessible by sanctions. Post-apartheid, underlying trends such as an expanding emerging middle class then became positive structural underpins to growth. But currently, corruption and xenophobia are among the many ills leeching away at South Africa’s ability to entrench itself as a global African leader.

One strategy South Africa can deploy in an effort to prosper is to leverage off the rest of the African continent through cross-border trade. Going hand-in-hand with this approach would be providing an enabling environment for fellow African investors to invest in South Africa. A vast opportunity lies in this pan-African potential.

In 1967, during the first decade of the 30-year-long Cold War, eminent Kenyan intellectual Ali Mazrui (in his treatise ‘Towards a Pax Africana: A Study of Ideology and Ambition’) asked that Africans - rather than outsiders - consolidate and create peace on the African continent. The chance Africans had to independently solidify the governance of their continent was, however, lost as Pax Americana flourished and weapons and war caused destruction in Africa, even as the Cold War reached a bloody end in the 1990s. Mazrui then asked the question: “Now that the imperial order is coming to an end, who is to keep the peace in Africa?”

The geopolitical game

Pax Americana is defined as a state of relative international peace, overseen by the United States and the United Kingdom. What began as a geopolitical platform off which to prosper economically by creating free trade under an umbrella of peace, turned into a stage for military might. This further entrenched the gulf between the ‘haves’ and the ‘have-nots’. As Pax Americana wanes, Russia and China are filling the vacuum. Now, more than ever, it is imperative that Africa – and South Africa as a consequential inhabitant of the continent – finds the path to achieving economic equality on a global scale.

In his Pax Africana? speech, delivered in 2016 at the Munich Security Conference, former United Nations Secretary-General Kofi Annan noted that while Africa had achieved a 5-6% economic growth rate, as well as a 40% fall in poverty since 1990, this growth was neither sufficient nor inclusive. Africa remains the second most unequal continent in the world, he said. Yes, a small minority have benefited, while investment in infrastructure, health and education – the key focus areas required to foster development – have stuttered. This has resulted in the shocking statistic that 40% of those who joined rebel movements were motivated to do so by a lack of employment opportunities.

While South Africa is less exposed to faction fighting and terrorism, social unrest is gaining traction. An idle mind truly is the devils’ workshop, one reason why it’s imperative that the intellectual capital of the continent is nurtured by increasing the amount spend on education – with the hope that this skills increase will inevitably lead to job creation. Fostering public-private partnerships will not only address short-term deficits, but is a way to share and transfer skills and knowledge across borders. Over time, education and an increase in skills will help to alleviate the need for foreign aid to Africa, as economic growth will be bolstered by stronger economic institutions that provide traction for this gain. In this way, Africa will take its economic destiny into its own hands.

Unlocking the opportunities

Deficits produce opportunity, and opportunity abounds in Africa as countries industrialise and sectors evolve in areas such as energy generation, infrastructure and distribution, and technologies that drive more competitive manufacturing. Potential private-sector investors on the continent should look to these longer-term trends as rich opportunities.

Adopting a Pan-African approach will allow smaller African countries to gain the scale needed to be competitive on a vast continent which continues to face considerable challenges, not least of which includes logistics. Economic institutions like the African Union and free trade agreements such as the Southern African Development Community (SADC) and New Partnership for Africa’s Development (NEPAD) are important steps on the road to achieving a Pax Africana. But there is still much that needs to be done.

Many inroads have already been made by South African companies into the rest of Africa (the most recent being Sanlam with its US$1.6 billion investment in Saham, a pan-African insurance company). However, the track records of these businesses when operating across the rest of the continent have been patchy. If South Africa can facilitate more dominant pan-African investment strategies for its public sector it would go a long way towards creating an interesting and alternative investment hub. Investors who want emerging market exposure will then have the ability to invest in a country that has a strong legal and financial underpin, thereby providing less risky exposure to the diversity of the African continent. At the same time, investors who want developed market exposure will find opportune examples in those South African companies that have grown offshore. There are very few examples of investment destinations that provide this ability to diversify investment portfolios.

Pax, the Roman goddess of peace, is often depicted holding a cornucopia. Africa certainly holds the potential horn of plenty. In order for economies to prosper, stability is an imperative. If South Africa can be the nexus that drives this consistency then, to answer Mazrui’s question, the resultant peace and economic prosperity will have been hard won. But it will be well worth it for the fortunes of the continent.