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Home > Asset Management Viewpoints > Africa: Still Challenging, But More Progress Beneath the Surface Than Most People Think

Asset Management Viewpoints

Africa: Still Challenging, But More Progress Beneath the Surface Than Most People Think

by Stephen Chan

Debunking the Myth of the "Dark Continent"

To those who are not deeply familiar with the continent of Africa, the history of kleptocratic rulers and long-running conflicts tends to perpetuate the myth of the “dark continent” even as tremendous strides are made in a large number of African states. While there is much still to regret and even to despair of in certain countries, one has only to look at the amount of venture capital going into Africa—even into countries that are really difficult to work in—to get a sense of how keen investor appetite is to build positions in what is already, after all, one of the fastest growing continents, and one of the few areas of the world with a positive demographic!

Another major point we have seen with African countries is that it only takes a few clean-up actions by the governor of a country’s central bank to transform the state of play in that country’s financial and business communities. No one expects corruption to disappear overnight, but investors take into account the possibility of “leakage” when investing in African projects, and at the same time we are seeing some very significant steps being taken to increase transparency.

The other point to be made, of course, is that corruption is by no stretch of the imagination an exclusively African phenomenon. As the 2008 crash demonstrated, once the tide went out all kinds of scams came to light in supposedly reputable international banks in advanced markets. Then, after the derivatives and securitization scandals on dodgy mortgage-backed securities were exposed, we had the manipulation of LIBOR scandal. Now that debacle, too, is already being overshadowed by a scandal over the supposed manipulation of foreign currency rates by the banks. So the advanced economies are in no position, really, to become too self-righteous about corruption elsewhere. There are tremendous United Nations and international programs designed to make businesses and financial centers more accountable and more transparent, and a number of African countries are already on board some of these programs. Moreover, corruption in Africa has been aided and abetted by major developed-market corporations for decades.

The Sarbanes–Oxley Act, which requires US company boards to take personal responsibility—to the point where criminal charges can be brought—for all aspects of their business when they sign off on the annual report and accounts, has not prevented US companies from signing off on some very dubious deals in the war-torn Democratic Republic of Congo (DRC), for example. Creative accounting, or using accounts to conceal, rather than reveal, the nature of transactions is not uncommon, and it needs to be challenged. What is clear is that a certain amount of worldliness is necessary in order to get deals done in Africa, but this is true globally as well. The challenge for companies is to hold the line, and not to allow the prospect of short-term gains to suck them into situations that can create lasting reputational damage that may well be far in excess of those gains. What is particularly required, when doing business in Africa, is proper political risk reporting.

Africa: Potentially a Bright Future

Personally, I am quite optimistic about Africa’s future. I do not have a utopian view, but neither do I believe that it is the so-called “Heart of Darkness.” The growing middle class in so many African countries, swelled by a huge desire on the part of so many to become middle class, is a hugely important driver for the continent’s future.

Another positive is the way resources are being concentrated in a group of people who are increasingly well educated, who want to hold their governments to account, and who expect the government to protect their newly acquired wealth. This is giving rise to a huge wave of interest in governance, and it is clearly the rising middle class that is proving the biggest and most effective challenge so far to ingrained corruption, and that is forcing change. Politicians know that if they don’t move with the times the people will force the issue and they, the politicians, will lose. By the same token, governments are realizing that when they align themselves with the aspirations of their growing middle class, these people become very powerful drivers of some of the more successful projects that African governments have undertaken.

Dealing With the "Legacy" of Past Mistakes

Of course there are huge legacy issues that Africa is still dealing with, and there are huge differences within Africa as to the willingness of incumbent governments to identify and adopt best practice. Robert Mugabe’s regime in Zimbabwe, for example, has presided over a spectacular destruction of national wealth in his country, and yet he is clearly going to be the chairman of the Southern African Development Community (SADC) for 2015 and may well become chair of the African Union itself.

Many in the west, and particularly in Britain, are horrified at that thought, but this fails to understand how complex things can be in Africa. There is, for example, a very powerful movement in South African government circles to try to rehabilitate Mugabe—not to excuse what he has done in the past, but to present him with a last moment of glory so that he can step down feeling validated. Anything that expedites that process is regarded as sensible. Moreover, the United Kingdom will have to tone down some of the distaste that it feels for him when the European Union moves away from the sanctions regime that has been imposed on Zimbabwe for so long. It seems clear that the majority of these sanctions will either be lifted very shortly or will be put into suspension. Again, the challenge is to spot when things are genuinely moving, to move with them, and to encourage the positives instead of remaining trapped in old antagonisms.

It is clear that, while there is some sector-specific recovery in the Zimbabwean economy, the country is a very long way from recapturing the high moments of its past prosperity. There is also no doubt that the whole land acquisition policy as put forward by Mugabe has been nothing short of a complete disaster. There was nothing inevitable about Zimbabwe going through this huge meltdown and slow-motion recovery. Land redemption in former colonized countries needs to be planned and staggered, and it needs to be implemented, where it is necessary, alongside a proper compensation regime. The whole idea of land seizure by the state or by sanctioned groups, such as veterans of guerrilla conflicts, is anathema. You clearly cannot proceed with a national policy on the basis of piracy.

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Further reading


  • Caute, David. Isaac & Isaiah: The Covert Punishment of a Cold War Heretic. New Haven, CT: Yale University Press, 2013.
  • Mitter, Rana. Forgotten Ally: China’s World War II, 1937–1945. New York: Houghton Mifflin Harcourt Publishing, 2013.
  • Said, Edward W. On Late Style: Music and Literature Against the Grain. London: Bloomsbury Publishing Plc, 2006.
  • Goldstein, Slavko. 1941: The Year That Keeps Returning. New York: The New York Review of Books, 2007.


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