MALABO, Equatorial Guinea, June 1, 2020/ -- By Leoncio Amada NZE, President for the CEMAC
Region at the African Energy Chamber and CEO of APEX Industries.In
Chinese, the word crisis is made up of two characters. One means danger
and the other opportunity. Even though in the middle of a crisis one
never sees opportunities, crises lead us to situations that we would
never have anticipated and force us to make decisions that we would
never have made otherwise. In such situations, developing Appreciative
Intelligence is what allows us to see the opportunities that accompany a
crisis.
A good example is the following story: in the 18
th
century, a Spanish ship arrived on the shores of Dundee, in Scotland,
with a shipment of oranges. The ship's captain offered to James Keiller
the shipment of oranges and quickly reached a good deal. However,
Keiller discovered that most of the oranges were overdone and had turned
sour, and that it would be impossible to sell them. Until then, oranges
were only consumed in juice or fresh. But all of this was to change
thanks to James Keiller's Appreciative Intelligence.
Marmalade comes from "marmelo", a Portuguese word that means quince, a fruit that in the 18
th
century was ideal for preparing preserves or making marmalades. Keiller
put his Appreciative Intelligence to work, using oranges instead of
quinces to prepare marmalade, and realized that the new jam had a very
characteristic flavor. For all these reasons, he set up a company that
changed the future of the Keiller family, dedicating himself to the
business of what we know today as “bitter orange marmalade”.
Looking
back on another historical example, we can quote the British economist
John Maynard Keynes, who appeared before a committee of the British
government. As the world was sinking into the Great Depression, he
exhorted those who listened to him to overcome the narrow mentality of
the bureaucracy and to look at the bigger picture. It was still six
years before Keynes published his General Theory, but he already
anticipated the sharp observations that he would later capture in his
book: "We enter a vicious circle: we do nothing because we do not have
money, but it is precisely because we do nothing that we don't have
money,” he said.
Keynes wanted to save the market economy, and,
in an era of communism and fascism, he was frightened by the political
consequences of not doing so. His call to overcome narrow interests
found no echo. Governments' reaction to the Depression was ineffective.
Nations indulged in competitive policies of national selfishness. And
the catastrophe came.
However, Keynes's ideas, arising from the
opportunity imposed by the crisis, still influence today’s world events.
He and other men of his generation created the multilateral system that
still lasts and to which African countries in general and those of the
CEMAC zone have to adhere without the slightest guarantee that their
interests will necessarily be considered and evaluated at their fair
value in this global chess game.
What Keynes and the others
accomplished, even in the heat of World War II, was due to the
combination of ideas backed by action. They helped create the post-war
economic structure. They laid the foundations for the formation of the
World Bank Group, the International Monetary Fund and what later became
the World Trade Organization.
In times of deep crisis, people are
more psychologically prepared to face and accept structural reforms and
changes that their leaders propose to them for the operation and
articulation of a new socioeconomic structure. It is in this sense that
the Covid19 crisis represents a historic opportunity for CEMAC countries
to initiate deep structural reforms in their economic and social
models. Reforms that in another historical context would be very
difficult to undertake and implement in order to permanently align
themselves with models that guarantee sustainable economic growth,
prosperity and well-being of the people.
Today we should not shy
away from the task of uniting ideas and actions. In a time when trust
has been lost, we need facts that restore the faith of the public,
private companies, civil society, foreign investors, etc ... The
governments and institutions of the CEMAC subregion are ready to tackle
that challenge ahead of them. In the face of a crisis of the magnitude
and implications such as that of Covid19, it is riskier, irresponsible
and dangerous to do very little than to do much.
The CEMAC region
is made up of 6 countries with an approximate population of 54 million
people, and an economy dominated mainly by the oil sector, which
represents 80% of exports and 75% of fiscal income according to World
Bank and the IMF. It is one of the areas most exposed to fluctuating oil
prices in international markets and will be the most affected economic
zone by the Covid-19 crisis in the entire African continent due to the
low integration and diversification of its economies.
In the
Central African subregion, countries such as Gabon, Congo, Chad and
Equatorial Guinea will be among the most affected in economic terms
given the weight of oil exports in their total exports. In a scenario of
$30/barrel, this represents a 50% reduction in oil export earnings
caused by a contraction in demand and price, with its negative
implications for states social programs.
The economic situation
of the subregion described above requires a pragmatic and courageous
analysis to undertake structural reforms that would allow it to emerge
from the state of lethargy in which it finds itself. Despite the current
situation of the oil industry, oil & gas will continue to be the
locomotive of economic activity in the CEMAC subregion. However, oil
revenues should from now on be used under a new economic-financial
paradigm, to fund the kind of economic diversification that would allow
the creation of a regional business fabric capable of competing at the
highest level with other companies from other economic poles.
The
implementation of policies to diversify economic activity, in
combination with a strong Local Content component within the oil sector
through the implementation of downstream projects to maximize local
value of our resources hence become imperative. A strong, dynamic and
innovative regional and indigenous oil industry with access to financing
will act as a catalyst and drive that will allow other economic sectors
to take off in all CEMAC countries. Local Content policies must go from
being mere regulations and laws adopted by national parliaments, to
actually being implemented and enforced without thereby jeopardizing the
continuity of operations in the oil sector.
Accelerating the
physical and commercial integration of the entire Central African
subregion, especially that of CEMAC member states, must be prioritized
by all economic and political actors. This must be done in favor of
economic diversification and industrialization induced by more relaxed
cross-border trade and taking advantage of the opportunities and
synergies offered by digital transformation and regional integration
promoted by the African Continental Free Trade Area (AfCFTA). Only in
this context can oil sector consolidation become a true locomotive that
would allow the resurgence of other economic sectors.
Central
Africa cannot advance considerably with national and intraregional
projects in their current state of low economic diversification. The
institutions of the subregion must have the courage and the will to
deepen economic and financial integration among all the countries of the
economic pole through policies that promote a greater distribution of
income, fiscal coordination and a common budget, in order to mitigate
the "country risk" criteria when negotiating with international
creditors or companies from other economic blocks for the financing and
implementation of projects in the CEMAC region.
Economic
integration within CEMAC may be favored by the implementation of the
African Continental Free Trade Area (AfCFTA); which requires a paradigm
shift towards greater horizontal and vertical diversification of export
products. AfCFTA has immense potential to contribute to the
diversification of CEMAC economies and deepening the sophistication of
export products.
In this new stage of continental changes such as
the implementation of the AfCFTA, Central African countries must dare
to use expansionary monetary policies, including the quantitative easing
that involves the injection of money into the productive ecosystem by
governments and other stimulus, as short-term measures. These are only
temporary measures to navigate the crisis. In the end, getting out of
this vicious circle of external shocks vulnerability will require of
CEMAC countries to invest in the fundamentals of diversifying their
economies. Such investments must be made both horizontally through the
increase in the number of products destined to exportation, and
vertically to delve into the added value of goods and services.
Therefore, governments must intervene to create the enabling environment
for these changes to happen, improving the positions of CEMAC countries
in the “Ease of Doing Bussines” index, instituting and monitoring local
content policies with the aim of localizing the acquisitions of
services, which in several cases represent 60% of the OPEX of the large
companies that operate in the continent.
Governments should also
facilitate the participation of small and medium-sized enterprises
(SMEs) in local and regional value chains by dismantling tariff and
non-tariff barriers and working towards and for a real integration of
CEMAC economies. These initiatives must have the private sector in the
driving seat when designing them, to make sure that government
bureaucracy does not derail the proposed objectives. The participation
of local and regional companies in the redefinition of the economic
architecture of the subregion towards the long-awaited economic
diversification must be based on meritocracy and the competences that
these economic actors have.
It is utopian to speak of economic
diversification of the CEMAC subregion in the absence of a solid banking
and financial sector that lives up to the challenge and is capable of
accompanying the transformation of the region’s economies. The BEAC and
all financial institutions in the CEMAC subregion must review and
redefine their role on how they are financing economic activity. The
implementation and use of new technologies such as mobile banking
platforms, mobile money and other technological innovations in the
financial sector will allow and facilitate the creation of new SMEs.
Banks have to abandon their comfort zone in which they have been acting
until now and move to real banking activity that is none other than to
properly finance economic activity and favor conditions in the financial
market that allow sustainable economic growth.
Compared with the
banking sectors of other economic subregions on the African continent,
it can be concluded that the banking sector of CEMAC is the least
developed and requires a profound structural reform to face the
subregion’s economic situation.
We cannot get tired of repeating,
emphasizing and advocating for economic diversification and
industrialization in Central Africa, because if CEMAC countries do not
address their structural problems now, the problems we face today will
only get worse. That is the vicious circle of dependence on the sale of
raw materials in the CEMAC area that the Covid19 crisis has exposed.
It
will be up to us to turn this crisis into a historic opportunity that
will allow us to definitively transform the economies of our subregion,
harmonize and converge our economic and financial systems, and create a
regional business fabric capable of competing in the international
arena.
If we do not do so now, we may possibly have lost forever the train that leads to sustainable development.
Crisis, as our Chinese friends say, are accompanied by opportunities.
No comments :
Post a Comment