Dr Nkosana Moyo

How Africa can emerge stronger after the pandemic

While all around us, the clouds may appear dark and stormy, there is always a silver lining to be found. That is even true of the pandemic, says Dr Nkosana Moyo, Founder and Executive Director of the Mandela Institute for Development Studies (MINDS), who believes the COVID-19 crisis has shone a spotlight on the risk of over-concentration of value chains and subsequently opened opportunities Africa is particularly well-placed to take advantage of. That is, if it seizes the day.

In his Changemaker talk for the Rotary Africa Centennial in April 2021, Dr Moyo, shed light on these opportunities and what Africa needs to be doing right now in order to benefit.

The root of the opportunity lies in correcting the vulnerabilities that have arisen as a result of globalisation, he explains. Globalisation has led to the ease of movement of people, goods, services and capital on a global scale, which made it possible to create value chains to extract maximum value from the resulting economies of scale.

“What we now realise is that an over-concentration of value chains has led to a vulnerability in supply and this should be seen as an overshoot that needs to be and can be corrected to relieve tensions in global society and also to mitigate some risks that have resulted directly from that process.”

Highlighting certain conditions that need to be met and require the continent’s full focus, Dr Moyo says: “There is a unique window of opportunity for Africa to participate in the de-risking of the overconcentrated global supply chains.”

First of these is an integrated African economy of scale that attracts investment capital. “If most of the continent becomes one economy without the hassles of duties and innumerable border controls, investors will take a serious look at the continent. As the world reconfigures manufacturing centres, Africa can present itself as a serious option for the location of these newly configured value chains.”

Further, Dr Moyo advocates a change in mindset away from the fixation on ownership to a comfort in hosting and regulating. In his view, ownership raises the burden of finance, while hosting and regulating removes that burden allowing things to happen faster.

“There tends to be an over-exaggeration of what are deemed to be sensitive areas of operation, resulting in demands for local ownership that simply get in the way of those with capital investments. This oversensitivity needs to be addressed so more space can be freed for those with capital to come and invest.”

Somewhat related to fixation of ownership, is the issue of price controls, adds Dr Moyo. “For most African consumers, access is more of an issue than cost and that cost is best managed through competition than price controls and regulations.”

It is for this reason that Dr Moyo advocates a market economy in Africa that is regulated through supply and demand. “Regulations against monopolies and oligopolies will largely be more effective in protecting the consumer than legislated price controls.”

An additional condition is the need to develop fit-for-purpose infrastructure – transport, ICT, energy, water and sanitation, health and education. This, is to facilitate the movement of people and goods and enable modern manufacturing. He believes if the mindset shifts to hosting and regulation, required capital for infrastructure would be raised with ease.

Lastly, Dr Moyo advocates a focus on financial products that de-risk the investments by private sector in case of need and a guaranteed minimum return on investment.

“COVID-19 has led to huge borrowings by governments which have taken advantage of historically low interest rates. It’s unlikely that policy makers in these heavily borrowed countries will institute polices that lead to significantly higher interest rate any time soon,, which means these markets will continue to be quite uncompetitive in terms of return on investments. This is exactly what Africa needs to stand out as an attractive destination for private sector capital,” says Dr Moyo.

One of the only places investors are likely to find opportunity is in Africa, according to Dr Moyo, however the continent needs to use this time wisely and be proactive in how it presents itself. “We are not being imaginative about how we bundle these opportunities and present them to these people with money,” he warns.

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