Commodities crisis spurs calls for African reform

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African nations need to respond to the commodity price crash by overhauling the continent’s regulatory burden and bolstering its energy infrastructure, prominent executives and officials have told a Financial Times summit.

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Participants at the London conference were virtually unanimous that reforms delayed when oil and metal prices were rising can be put off no further now that demand from China has slowed and the commodities supercycle is on a downturn.

“It is a call to both regulators and business to ensure they maintain foreign direct investment and encourage local entrepreneurs,” said Wale Tinubu, chief executive of Nigerian oil and gas company Oando, arguing that it was now urgent to diversify countries’ economies across the resource-rich continent.

A chief focus of his and other participants’ attentions was the energy sector, where pricing regulations have often deterred investment. Efforts to industrialise countries’ economies have often been hobbled by inadequate energy supply. Spain produces more electricity than all of sub-Saharan Africa.

Mr Tinubu said the focus in Nigeria’s energy sector had long been on exports rather than re-routing excess oil and gas into the low price local market, which is badly short of energy to power Africa’s biggest economy.

The backdrop to his comments is the reversal of fortunes of oil revenue-dependent countries such as Ghana and Nigeria, both of which have been forced to devalue their currencies by more than 20 per cent against the dollar since the oil price fall began last year.

But to date both countries have been more hesitant about structural reform. Ghana is reluctant to privatise its energy sector, while Nigeria’s power sector privatisation programme stalled towards the end of the presidency of Goodluck Jonathan, who left office this year.

Ivan Glasenberg, chief executive of Glencore, the mining and trading group whose shares have swung wildly in the wake of the commodities slump, emphasised similar concerns.

“Long-term I believe in Africa for commodities, but the African continent needs to help facilitate us and power is key,” Mr Glasenberg said. He pointed to a number of African projects that had struggled due to poor power supplies.

Donald Kaberuka, a former African Development Bank president, called for moves such as cutting fuel subsidies: “While world commodities prices are a key issue we shall need to deal with energy infrastructure and security,” he said. One of a number of participants to call for heightened spending discipline and efficiency, he added: “We need to seize the moment to make policy reforms on the fiscal side”.

Amy Jadeismi, managing director of Ladol, a Nigerian logistics base, argued that the fall in the prices of oil and other commodities had in fact been a boon.

“We’re getting a lot more business as a result of falling oil prices,” she said. “People can no longer rely on getting rich from oil. They’re diversifying. Future growth is going to come through the private sector.”

Aliko Dangote, the Nigerian sugar, cement and telecommunications tycoon who is Africa’s wealthiest businessman, added that Nigeria would weather the oil shock if it stepped up the fight against corruption launched by Muhammadu Buhari, the country’s new president.

“If the government collects all its taxes and duties, I think we will be okay,” Mr Dangote said. “We will not have as much as we had before but it will be okay.”

However Andrew Alli, president and chief executive of the Africa Finance Corporation, said he was “not unremittingly positive” over African prospects in the short term.

“The next one to two years are going to be rough, but in the longer term it’s a buy,” Mr Alli argued. “Most African countries are reliant on one commodity or another and they’re suffering.”

Additional reporting by David Sheppard

 

Source:FT.com

Babatunde Akinsola
Babatunde Akinsolahttps://naija247news.com
Babatunde Akinsola is aNaija247news' Southwest editor. He's based in Lagos and writes on the Yoruba Nation political issues, news and investigative reports

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