This press statement that went with the Russian investment shop, Renaissance Capital, launch of its first pan-African equity fund last week is worth the read. Excerpts below should give African economics skeptics whiplash:
We are sitting here in London, one of the two main capitals of global finance, and the financial centre of Europe, still the world’s largest single economic bloc. We are discussing Africa, a region which has benefited least from the revolution in global finance and is still considered to be among the most risky investment environments globally. Yet if we were to close our eyes for a second and forget the legacy of both regions and focus instead on the hard numbers, we might be a little confused about which is the centre of global finance and which is the risky investment environment. One has an economy which is smaller now than it was five years ago, a budget deficit of 10% of GDP, public debt to GDP of 80%, unfunded liabilities of 200% of GDP, a population which is aging and can’t afford the size of its public sector, industry which is protected and a paralyzed government in the middle of a political crisis. The other has enjoyed average real growth of 6% per annum for a decade, a savings rate of nearly 25% of GDP, debt measuring less than 25% of GDP, a young and growing population, massive internal investment and a political system which is more stable now than it has been in 50 years. A simple question might be where would you like to invest your money? But I guess you are already asking that question.... To me, the answer is clear. When capital is offered the choice between the high growth and low leverage of the new economies driving global growth, or the slow growth, high-leverage and structural inflexibility of the developed world, it will become increasingly impatient with the old model. The developed world will be forced to either restructure its economic model to compete in the emerging global economy, or face an increasingly torrid time of crisis, inflation and rapidly rising funding costs....and the why for all this optimism:
So, what is driving the transformation? Basically, Africa stands to become the biggest beneficiary in history of the faster transmission and increased mobility of ideas, economic models, technology and financial and human capital......but some reality checks or neoliberal caveats...
Of course, it hardly needs repeating that the African opportunity comes with large associated risks. The sheer complexity and speed of change inevitably brings with it dislocation and volatility. Governance structures are much improved, but they have not yet been fully tested against the sort of volatility and structural change that is likely to characterize Africa’s different economies over the next decade. While markets have proven time and again their astounding ability to create value, they also necessarily involve considerable destruction amidst the wealth creation. It will always be tempting for governments to meddle – to protect domestic champions, to pick winners, to distribute more fairly, or simply to get a slice of the pie. The more they meddle, the less the creative destruction which can drive economic growth.But some would argue that "the slow growth, high-leverage and structural inflexibility" vs. higher risk, fast growth dynamic between developed and less developed markets is already at play on the continent. The whole thing is worth the read. But, still, what's Chinese for "meh"?