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Africa

It's time to decentralize our African understanding

Posted by on 09 August 2016
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In advance of the War Games session taking place at FundForum Africa 2016, geopolitical expert John Hulsman discusses the many complexities of the current political and economic landscape, and why it's important to adopt a decentralized viewpoint when thinking about Africa.

‘Africa’ is shorthand for the analytically lazy. The continent, like the rest of the Emerging Market world, simply cannot be understood by investors when it is artificially lumped together. Indeed, the primary salient comparison that can be made of the countries that comprise the players for our war game (Rwanda, Nigeria, Democratic Republic of Congo (DROC), South Africa, and Kenya) is how very different they all are, in terms of their politics, economics, and domestic and foreign policies.

The days of the BRICS are over; no more putting countries together that have little in common. Instead, the new era for political risk assessments will be all about rigorous analysis at the country level and lower, as befits the complexity of the confounding but compelling multipolar world we actually live in.

What will make this variegated approach obvious in the coming years is the very different trajectories African countries take to a period a gradual tightening by the US Federal Reserve. While, as my political risk firm predicted, tightening will be slower than most analysts expected, there is no doubt that is the general overall direction of Fed policy.

This major external event—one of the few common to the whole of Africa and indeed the Emerging Market world—can be expected to separate the wheat from the chaff. It will make it abundantly clear which countries fixed their economic roofs while the sun shined---using the long period of extraordinarily loose Fed policy to embark on structural economic reforms—and which did not.

At this point a more complicated, but more rewarding, world will be unveiled for Emerging Market investors. There will be precious little uniformity in the Emerging Market world and in Africa specifically, but instead there will be glittering opportunities in some countries, and dangerous pitfalls in others. In other words, the coming investment era in Africa is one in which we must actually analyse countries again, rather than latching on to seemingly secure—but actually hugely potentially dangerous—oversimplifications of what is going on in an intriguing world full of investment opportunities, if you simply know what is going on.

Want to take part in the discussion? Join John Hulsman at FundForum Africa in London, 14 - 16 September, and take part in the interactive war games, 'How will the fed interest rate rise affect African markets?'

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