Is Africa a solution to the Russia-Ukraine crisis?

Post-pandemic. global inflation is still expected to remain elevated at 6% in 2023 from 9% in 2022. The growth is projected to slow to 1.9% in 2023 due to the Russia-Ukraine crisis. Does the world see Africa as the investment hub to tackle global recession?

In 2021, the African continent hit a record of $83 Billion in foreign direct investment (FDI), according to a report published by the United Nations Conference on Trade and Development (UNCTAD) on 9th June 2022. The investment flew to the continent largely in subregions of Southern Africa, East Africa, and West Africa while those in Central and North Africa recorded a decline in attracting FDI. Investment in Africa is being done largely by the European nations, the United Kingdom ($65 Billion), and France ($60 billion). China has topped the chart in terms of capital with an investment of $70 billion.

“If we exclude this transaction, the increase in FDI flows to Africa, while still positive, would be more in line with what we observed in other developing regions,” said James Zhan, director of UNCTAD’s investment and enterprise division.

The African continent reaps benefits from being the youngest continent in the world with 60% of the population group aged below 25 years old; thus, fielding great manpower required by the businesses. Apart from the age factor, the continent is also rich in untapped resources and carries the massive potential for sustainable agriculture and a huge scope for e-commerce activities. According to the report by the Enterprising Investor, Africa accounts for 40% of the gold reserves and 30% of the mineral reserves.

One of the biggest benefits of the continent lies in AfCFTA (African Continental Free Trade Area), which was formed under the free trade agreement signed by 54 countries of the continent as of 2023 to promote the African market by eliminating trade barriers. An African organization, Mo Ibrahim Foundation, in its report predicted that consumer and business spending could set a record of achieving a $6.7 trillion economy by 2030.

According to the Agriculture in Africa 2021: Focus Report, Africa holds 60% of the world’s uncultivated Arable land, which makes it no less of a cakewalk for investors to grow agricultural startups. But a lot relies on modernizing and educating the local population. Intra-regional trade is one of the key factors that boost the chances of investors rallying to pour their investment into the region but security still remains one of the major challenges.

The 10-month civil war in Ethiopia known as the Tigray war lasted between 2020 - 2022 and displaced nearly 2 million people. West and Central Africa are haunted by drug trafficking.

According to a report by CSIS, China has built or funded nearly 46 ports in Djibouti. It is one of the leading flashy big-spenders in the African continent and has pumped more than $ 124 billion into Africa since 2000 without questioning the continent on human rights violations. According to a report published in 2022 by Human Rights Watch (HRW), an independent organization working closely in the continent on defending and protecting human rights states that apart from countries like Cameron, Central African Republic, Chad, Ethiopia, Mozambique, Nigeria, and South Sudan, where armed-conflict is frequently evident, Angola, Burundi, Eswatini, Rwanda, Uganda, and Zimbabwe, too, witnessed a rise in human rights violation.

The report also sheds light on how Ansar-al-Sunna, an Islamist-linked armed group has ravaged families of nearly 8,00,000 people in Mozambique. The terrorist organization has been using young children as soldiers in their fight against government forces. Terror-struck sub-regions of Africa are, however, not stopping countries from investing heavily in the continent.

“With the right policies in place, digital technology can give an unprecedented boost to sustainable development, particularly for the poorest countries. This calls for more connectivity; and less digital fragmentation. More bridges across digital divides; and fewer barriers. Greater autonomy for ordinary people; less abuse and disinformation,” said UN Secretary-General António Guterres during the 17th Internet Governance Forum in Addis Ababa, Ethiopia.