Out of Africa: reaching tipping point

**’Rising continent’; ‘new China’: there have been no lack of superlatives expressed recently to describe Africa’s economic takeoff.**

Indeed the Dark Continent’s mesmerising growth rates of 5 per cent from 2000 to 2008 in sub-Saharan Africa – against a world average of 3.5 per cent during the same period – have made the financial world take notice. Ghana and Eritrea alone enjoyed 14.4 and 8.7 per cent growth respectively.

Add to that a population of one billion and massive mineral deposits, which include 90 and 50 per cent of the world’s platinum and gold reserves, respectively.Its not surprising that McKinsey Global Institute, a consultancy, has [championed](http://www.mckinsey.com/Insights/MGI/Research/Productivity_Competitiveness_and_Growth/Lions_on_the_move) the dizzy rates of return on foreign investment in Africa – higher than in any other developing region.

The rub however, lies in the trap of taking the whole continent as a byword for unbridled economic prosperity and openness.

While it’s true that certain countries have embraced political reform, more robust institutions and transparent business practices, the picture is far from rosy for all. Madagascar, Sudan and Ivory Coast are all cases in point of fault lines within Africa. Ongoing political tensions have boiled over into civil war. Deep-rooted structural barriers remain.

A persistent thorn in Africa’s side moreover has been the lasting legacy of the redrawing of African borders in the colonial era. Minorities found themselves trapped in partitioned states dominated by majority ethnic groups. These became the arena for political conflicts, which as the Rwandan genocide exhibited, can reach atrocious conclusions.

An unequal distribution of wealth is an additional source of resentment. While the luxury goods market soars – Porsche has launched its first dealership in Nigeria in past weeks – three out of five 18-24 year olds are unemployed. This time bomb could well engender another ‘Arab Spring’ style social outburst if not addressed. Other tensions simmer on.

In 2012, the Economist Intelligence Unit’s [political instability index](http://viewswire.eiu.com/site_info.asp?info_name=social_unrest_table&page=noads) identified seven out of the top twelve to
be African states. Meanwhile the panel of the Mo Ibrahim prize for good governance in Africa has failed to turn up a winner for the third time in six years. The $5 million prize – awarded each year to a democratically elected African leader, recognised for good governance, raising of living standards and fair democratic succession – could not turn out a candidate who respected all the criteria.

Despite these risks, investors have arrived in their droves to get a share of the African boom.

Near the southern tip of Africa lies the tropical idyll of Mauritius. The country boasts an established financial sector – both domestically and offshore – founded on a pool of highly qualified professionals and political stability. It ranked 158 out of 165 on the aforementioned instability index. This all cements its global credibility. But above all, the country holds firm investment protection agreements with 36 (mostly African) countries, bestowing fiscal benefits and
rights for investors’ assets. It is furthermore an instrumental actor in the South African Development Community and Common Market for Eastern and Southern Africa.

The Mauritian financial jurisdiction has become an entrepôt for foreign investors, guiding billions of dollars of foreign direct investment (FDI) towards the continent. In the last two years, the nation has been the FDI leader in Zimbabwe, steering in $3.5 billion of investment.

It is to be celebrated that Africa is on an upward trajectory and offering lucrative opportunities for investment. However to reach the goose with the golden eggs, it must tame the capricious fissures lurking beneath the surface.