Inflation opens growth window for AfricaThursday June 23 2022
A crisis of inflation is brewing up all over the world. Coming hot on the heels of the rebounding economies it looks like it will spare no one.
In 2021, the Kenyan economy unexpectedly expanded by 7.5 percent. And now, inflation is hovering at 7.2 percent, dashing any hopes of replicating last year’s performance.
So, what is happening? Many economists blame the causes of inflation on the price increases on post-pandemic demand and the war in Ukraine. And as it continues to bite into people’s incomes worldwide, others are seeing an opportunity.
James Mwangi, Equity Group CEO, looks at it as an opportunity for Africa. Talking at Windsor Hotel last week, he said the world is “resetting as it did after Second World War”.
Mr Mwangi theorised that recent vaccine nationalism and the increasing food insecurity resulting from concentration in production from such countries as Ukraine and Russia has forced many countries to reconsider how to sustainably provide for their citizens.
“Russia’s fertiliser production advantage, which is now a threat to global food security can easily be countered by Africa if we produce similar fertilisers to our farmers,” he said.
In my view, time will prove Mr Mwangi right if we can prioritise how we can increase food security in Africa.
In the meantime, globalisation is dead. Russia’s invasion of Ukraine killed it. The divestiture of multinationals from Russia was quick. Many of the firms that moved may never go back but the decision to move will be a case study of what may happen in the event China implements its one-China policy over Taiwan.
If the policy comes to pass, the consequences would be as immediate as in Russia. That would immediately force many multinationals to seek alternative places for continued production. The shift could benefit Africa, India, and other parts of Asia. The change could also spell a new geopolitical realignment and perhaps disperse prosperity elsewhere.
As the global North and China are busy realigning themselves post-globalisation, Mr Mwangi does not want Africa to wait for anyone to plan for its future. Unlike in the past when Africa depended on foreigners to fund even mundane investments, he sees a window of opportunity for the continent to mobilise development capital like never before.
To show that he is walking the talk, Equity is now becoming a regional development bank and with its partners, they plan to transform the continent by implementing the proposed pillars which are improving agricultural productivity six-fold, value-addition to all Africa’s agricultural output and mining, investment and trade, populate value chains with MSMEs, invest in knowledge, science and innovation and take care of the environment by leveraging non-legacy technologies for production.
What Mr Mwangi and his team at Equity have done is take the leadership in spearheading development just as many of the major banking institutions did in the US.
The banks in the 19th and 20th centuries were a major determinant of the geographic dispersion of industry and the capital deepening of the United States.
And, additional manufacturing capital and output were generated at the county level, as well as value-addition at the firm level.
Why then must we entrust our future in what Mr Mwangi saying?
For a man who has passion, the drive, and a convening power that even African states don’t have and notwithstanding also how he transformed an Equity Bank to be a major key player in the financial sector, he is got the vision and the ability.
During the two-hour ebullient speech, he gave last week, Mr Mwangi did not have notes or PowerPoint. What struck many who attended, is how he is perceptive with a sharp memory and a disarming handshake. He greets dozens of people calling them by their first names perhaps this is one of his most valuable assets that has given him the global social network that is critical to his huge success.
Mr Mwangi also proved himself as chairman of Vision 2030 where I had the privilege of working with him. It will be sad to read of Mr Mwangi 100 years later as scholars would conclude that Africa had an Einstein whom they didn’t take advantage of in his prime.
As Mwangi points out, inflation has made life difficult especially for the poor, but it is also stoking an opportunity that Africa must take advantage of to transform the lives of many. Let’s take Mwangi’s transformative views seriously as he has demonstrated through his many initiatives including CSR and ESG that it possible to overcome our challenged and restore our dignity.
The writer is a professor of entrepreneurship in the University of Nairobi’s Faculty of Business and Management Sciences.