Reality is malleable. Feelings trumping facts is a very human instinct, one that can have outsized consequences when it achieves critical mass. Feelings that are organised into narratives are virtually unstoppable.Take Africa, for example. It is now well documented that this massive, diverse continent is consistently subjected to an exaggerated risk premium in global financial markets.
A general sense of riskiness; distilled into a reductive but compelling story about fragility, instability, and corruption; funnelled through global regulators, financial institutions, creditors, and investors has forced a continent to pay far more for capital than it should.
This is an obviously simplified tale in and of itself. And it matters, of course, because the story isn't new. What is new is how African leaders across political, economic, and financial ecosystems are responding. Specifically, they are spearheading two derisking initiatives in tandem: one proving creditworthiness to the system and one reducing exposure to it. The first initiative, therefore, is in direct response to the risk narrative surrounding the continent and is concentrated at the project level: demonstrating that individual investments are creditworthy by being bankable in their own right and through credit enhancements, like local guarantees and insurance.
The second initiative is systemic: neutralising the influence of external judgements by pursuing greater economic sovereignty, through intra-African trade, domestic capital mobilisation, and payment infrastructure. This undertaking is, in parts, both wonderfully subversive and deliberately understated. If successful, the second initiative will simultaneously function as a diplomatic and economic posture. In doing so, it will result in a real rebalancing of power, one where stories generated elsewhere will not be enough to impact the structural realities of an entire continent.
Originally published by African Business.