Interview: Mark Simmonds
Where do you see the biggest potential for British investors to increase their involvement in Africa?
MARK SIMMONDS: The Africa story is no longer just about extractives, even though there have been important discoveries in countries like Ghana, Uganda and Tanzania in recent years, as well as mining opportunities across the continent. Other sectors are of increasing importance. Renewable energy – solar, wind and geothermal – will contribute to the continent’s power deficit. An increase in individual wealth has seen growing demand for education and training, health and financial services, as well as consumer goods as people “trade up” to global brands. Technologically, Africa has moved straight to mobile for many services. Governments in Africa know that if they are to provide jobs for their growing populations, realising the potential for agriculture is vital. Linking many of these sectors is the need for roads, rail, ports and airports to ease trade within the continent and increase exports.
How can West African economies reduce their vulnerability to volatile external revenues?
SIMMONDS: Commodity price volatility can hit resourcedependent countries hard when prices drop quickly as a result of an economic crisis, an increase in global commodity supplies or changes to global demand patterns in response to technological change. Resourcedependent countries need to put in place economic strategies to cope with such crises when they occur by focusing on the medium- to long-term. Strategies should include investing in government capacity for public investments and limiting additional consumption during commodity booms. There is no economic policy that can directly counter external shocks from commodity price volatility, but governments can put in place long-term policies to diversify the economy away from relying on commodity exports: promoting governance, corporate transparency and healthier relationships between government and big businesses; decoupling public funding from volatile resource revenues (by accumulating foreign exchange reserves to help cushion negative impacts during financial crises, for instance); and developing well-regulated financial markets to hedge the risk of commodity price fluctuations.
What do you see as the primary factors influencing changes in bilateral trade levels?
SIMMONDS: The main factor influencing bilateral trade is the business environment within a country. The rule of law and political stability are key considerations for companies seeking to operate effectively and grow their business. Corruption and excessive bureaucracy also have a bearing on how attractive a particular market is, and the Foreign and Commonwealth Office is committed to promoting best practice in these countries, often working with business to overcome potential barriers. It is difficult to ascertain the extent to which rising purchasing power in these countries has impacted British exports, but the trade figures for 2012 demonstrate the positive effects of increased cooperation and economic activity.
How can West African governments ensure greater regional economic integration?
SIMMONDS: The region is poorly integrated. Intraregional trade among ECOWAS member states remains very small, around 10% of total trade. More than 80% of ECOWAS’s exports go to markets outside the continent. ECOWAS accounts for only 0.66% of world merchandise exports. West African governments need to see that regional integration can have significant benefits for their economies.
Regional integration is about making access to markets cheaper and easier through better roads, effective border posts and Customs procedures, and reduced bureaucracy to bring down the costs of doing business.
Regional markets are an untapped opportunity for all of the countries in the region. But Nigeria, in particular, needs to take a lead because it is the largest economy and the most populous country in the region.
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