The global commodities boom has been good for growth across Africa. In the decade to 2010, six out of 10 of the world's fastest growing economies were in sub-Saharan Africa. But in classic resource curse fashion, that growth has not always trickled down to benefit African citizens.
Take Zambia: the booming copper price enabled the country to go to international bond markets twice in the past three years, though did not result in any marked improvement in governance. Investors and policy analysts I spoke to in late April last year complained that they then still had very little information on how Zambia's first Eurobond, issued in September 2012, had been spent. They had little understanding of the expenditure plans for the second Eurobond, other than that like the first Eurobond, it was expected to be allocated to infrastructure investment.
Despite the immense resources at the Zambian government's disposal over the past few years (up until last summer's collapse in the currency), Zambia ranks 141 out of 187 countries for life expectancy, education and living standards (2014 UN Human Development Report). Political noise leading up to next year's General Election, expected in September 2016, may further delay progress on these measures and create uncertainty around infrastructure development plans.
Nigeria's economy has expanded so successfully that last April its government claimed, based on a GDP rebasing, that it had surpassed South Africa as the continent's largest economy. In 2012, it also became the second African country to gain 'emerging market' status as per J.P. Morgan's emerging-market bond index. But last year Nigeria ranked 152 out of 187 countries for human development, although gross national income per capita improved steadily over the five years to 2013 (World Bank).
Nigeria is also infamous for the corruption and transparency issues that have long plagued its oil sector. This culminated in an accusation by Lamido Sanusi, former Central Bank Governor and Emir of Kano, that some $20bn had mysteriously gone missing from the Nigerian National Petroleum Corporation, which resulted in his suspension from the central bank's helm in February last year. With a new 'strong man' heading the country in the form of former military dictator Muhammadu Buhari, however, there is a renewed sense of optimism among analysts that he will address his stated priority to tackle corruption.
Angola, despite being one of Africa's largest oil producers - the oil sector accounts for more than 50% of GDP - like Nigeria has seen huge revenues for the government before the oil price fall began from June last year. It nonetheless has a population largely living on less than $1 a day.
What Zambia, Nigeria and Angola share, along with other resource-rich African economies such as gold-filled Ghana, another commodity facing a slump over the next five years according to BMI Research, is a new form of pressure not seen or understood during the boom times for commodities.
Although the fall in the oil price and that of other commodities is proving painful for these countries over the short to medium term, a pain that will be passed on to their citizens, over the longer term this trend could have a two-fold positive effect. First, these governments will be forced to take economic diversification more seriously. Razia Khan, regional head of research for Africa at Standard Chartered made this point earlier in the year in an interview with the Wall Street Journal's Moneybeat, in reference to the impact of a lower oil price on Nigeria's economy. Secondly, to enable this they will need to implement reforms that improve governance and transparency - for example, through the development of better institutions. Harnessing this opportunity successfully will attract a greater amount of international investment, while helping to create more sustainable and inclusive economies for ordinary African citizens.
The incentive for resource-rich African governments to change their behaviour will come out of necessity, especially in those countries operating in more democratic political structures such as Zambia and Nigeria. Increased costs to debt servicing as a result of a stronger dollar, and weak domestic currencies, limit the ability of these governments to access finance and increases the cost of capital. Yields on Eurobonds have risen for Ghana, Gabon, Zambia, Cote d'Ivoire and Kenya, Richard Marshall, infrastructure analyst at BMI Research said in a presentation last week.
China's economic slowdown and the prospect of a US Federal Reserve rate rise (which we could see a decision about on Wednesday although most analysts forecast this will get pushed back to Q3 if not later), are added pressures facing Africa. The last five years have been good for African economies, with several countries able to access international capital markets for the first time, but the next five will be tougher and are likely to reveal which governments are most serious about reform. The World Bank agrees that lower oil and other commodities prices will squeeze developing countries, which are forecast to grow by just 4.4% overall this year, and warned back in April that conditions are becoming harder for Sub-Saharan African economies as terms of trade weaken for commodity exporters.