Under the International Monetary Fund’s Heavily Indebted Poor Countries (HIPC) initiative, Somalia received total debt relief of $4.5 billion on December 13th. The relief package reduces Somalia’s debt-to-GDP ratio from 65% to around 6%, removing a major stumbling block to the recovery of one of the world’s most troubled nations.

The country descended into clan warfare following the overthrow of the government of Mohamed Siad Barre in 1991 and subsequent failed attempts by the US and other powers to stabilize the nation.

Over the past 15 years, Mogadishu’s successive governments, struggling to exert control over a divided nation, have faced an Islamist insurgency led by the al-Shabaab militant group. Thousands have perished in conflicts and attacks as al-Shabaab extended its violence beyond Somalia, including the 2013 assault on Nairobi’s Westgate mall, which resulted in 71 casualties. The current government, led by President Hassan Sheikh Mohamud, claims progress in suppressing al-Shabaab but now contends with one of Somalia’s worst droughts in living memory.

Officials close to Mohamud view the debt write-off as a pivotal event, endorsing the administration’s efforts to address deep-seated economic and political challenges. The deal would enable Somalia to access concessional loans, fostering economic reform and laying the groundwork for sustained growth.

Ahmed Soliman, a researcher at the Chatham House think-tank, described the IMF’s decision as lifting a substantial burden off Somalia’s shoulders, allowing it nation to focus on economic priorities, poverty reduction, and job creation: all essential to achieving long-term stability, according to the Financial Times.

The IMF and the World Bank’s International Development Association approved the write-off after Somalia fulfilled 13 of 14 requirements related to expenditures, tax collection, governance, statistics, and poverty alleviation.

Under the agreement, bilateral creditors forgave $3 billion in debt, with Russia granting debt relief of $684 million in July. The process, spanning almost a decade, also marks a thaw in Somalia’s relations with the global community; the UN Security Council last month lifted a 32-year arms embargo on arms deliveries to the government in Mogadishu.

The restructuring has been in motion since June, when the Finance Ministry reached preliminary agreements with its official creditors, including China and members of the Paris Club. Next, each official creditor will initiate internal processes to formalize the MoU. The terms outlined in the document will then be implemented through bilateral agreements with individual members of the Official Creditor Committee.

Key components of the agreements will include an average extension of debt maturities of more than 12 years and a structured interest rate, beginning at 1% and gradually increasing to 2.5% over the next 14 years. An additional mechanism allows for increased payments if Zambia’s economic performance exceeds expectations. Zambia will make payments of some $750 million over the next decade, drastically reduced from the nearly $6 billion it owed its official creditors before the restructuring.

The next crucial step is securing a comparable agreement with private creditors, Finance Minister Situmbeko Musokotwane noted, including international bondholders.

Zambia is currently in formal discussion with a bondholder creditor committee to restructure more than $3 billion of overseas bonds. Negotiations began last month, and since then, creditors have been restricted from trading the country’s bonds. According to Reuters, Zambia has three outstanding dollar bonds, maturing in 2022, 2024, and 2027, that are presently trading at between 52 and 58 cents on the dollar. While the exact timeframe for finalizing agreements between Zambia and individual bilateral creditors remains uncertain, the government says it is firmly committed to securing a deal with private lenders that aligns with the terms with its official creditors. Musokotwane expressed gratitude to the latter, particularly China, France, and South Africa, for their dedication to resolving Zambia’s debt challenges. Despite a brief miscommunication concerning the signing of the MoU, Zambia appears to have a path to financial recovery.

Bank of America Corporation recently completed its first debt-for-nature transaction in Africa. This was Africa’s first-ever deal involving private creditors to refinance $500 million of Gabon’s sovereign debt.

The Charlotte, North Carolina–based bank entered a market once controlled by Credit Suisse, starting what will be a 15-year-long conservation and refinancing project. The arrangement effectively reduces the interest rate on Gabon’s debt, estimated to be 52.6 % of GDP in 2022 by the World Bank. It also extends the repayment timelines, due to the political insurance provided by the International Development Finance Corporation, a development agency backed by the US government.

Gabon plans to spend at least $125 million to widen a marine reserve and strengthen fishing regulations, which could help protect a third of the world’s endangered leatherback turtles. Advocates of these agreements anticipate an overhaul of the financial framework for developing countries exploring inventive strategies to handle their expensive debt financing. Debt-for-nature swaps involve indebted developing countries collaborating with Western banks, conservationists and developing-finance institutions, resulting in the partial repayment of existing sovereign debt, which is then replaced by a fresh loan carrying a lower interest and extended maturity.

Gabon repurchased three bonds with a combined nominal value of $500 million—one maturing in 2025, and two in 2031. These buybacks represented approximately 4% of Gabon’s overall debt, according to Moody’s.  The Nature Conservancy, a nonprofit organization, helped arrange the deal.

The formidable challenges that our marine ecosystems confront have been duly acknowledged by the United Nations’ Sustainable Development Goals (SDGs). “Goal 14” is focused on the conservation and responsible use of oceans, seas and marine resources to foster sustainable progress.

Within this context, blue bonds emerge as debt instruments issued by governments and developing banks, securing capital from investors for financing projects centered around marine- and ocean-related endeavors that yield positive ecological, economic and climate-related outcomes.

BofA’s objective is, by 2030, to channel and utilize $1.5 trillion toward advancing the 193 SDGs agreed upon in 2015. A significant portion—$1 trillion—is targeted to assisting clients in reducing their carbon emissions.

Somalia is deliberate in growing mobile money access to its people, explains Abdilahi Ali, who steers the Central Bank’s monetary and regulatory policies.

“As we rebuild our nation, we are aware of the fact that we are operating in an environment where 98% of our currency is counterfeit.” Ali says, citing the ramifications of a devastating civil war and a collapsed financial system, with the statistic initially provided by the IMF, with the Bretton Woods institution further claiming the remaining 2% of the money said to be tattered.

In fact, 70% of adult Somalis use mobile money services regularly, the World Bank says. Globally there are now 310 mobile money services in 96 countries; 171 of those services are in Africa, and 157 are in sub-Saharan Africa specifically, according to the Global System for Mobile Communications Association (GSMA). 2021 State of the industry Report on Mobile money.

“Digitization of payments has increased transparency and reduced the cost of financial transactions, leading to greater efficiency and economic growth. Once a payment system is working effectively and efficiently, it becomes a game changer to an economy,” says Njuguna Ndungu, cabinet secretary, of Kenya’s National Treasury and Economic Planning.

Overall, Africa had a mobile money transaction value of $495 billion in 2020. That’s almost two-thirds of the global value of $767 billion, according to the GSMA, underlining that the region’s banking future is secured by monetary digitization.

Kenya and Ghana have moved fast to adopt digital payments, according to the Boston Consulting Group. Transactions made via mobile wallets were equivalent to 87% of the GDP in Kenya and 82% in Ghana. The report further estimated that mobile payments in Africa could rise from “$3.5 billion in 2021 to between $14 billion and $20 billion in 2025,” says Michael Mbuthia, East Africa regional director at AfricaNenda.

Sanjeev Gupta, a senior fellow at the African Center for Economic Transformation, says monetary digitization has had a positive impact on Africa. It provides more—and better—information to policymakers to formulate and implement regulations, particularly where national identify card schemes have been implemented. It also lowers the cost of administering taxes and makes it easier for citizens to comply with their obligations to pay taxes.

“Gradually, it is improving the reach of policymakers to provide benefits to the population,” says Gupta. “And most importantly, it is contributing to financial inclusion and allowing citizens to transfer funds using mobile-phone-based financial services platform. All in all, this is increasing the efficiency of financial system and expanding the ability of governments to provide public services at a lower cost and with less leakage—an important consideration where resources are limited.”

In sub-Saharan Africa, mobile money has seen exponential growth. The platform is touted as a revolutionary tool for expanding access to financial services in low-resource environments. With just a mobile phone, users are able to hasten transfer of money at low cost and without needing access to an existing banking account.

The uptake of digitization of payments has varied across African states, with some countries showing a high degree of adoption and others lagging behind, says Njuguna.

The key challenge is providing a stable and predictable policy framework for financial service providers to follow. It is equally important to have a stable macroeconomic environment where countries manage their fiscal and external policies without creating undue imbalances that lead to frequent changes in policies, says Gupta.

In addition, Gupta says there are over 20 countries in sub-Saharan African that currently have adjustment programs with the IMF and many more are in discussion to have a program.

“Many countries are at risk of or in debt distress, which would require a major realignment of their macro policies,” Gupta says. “The debt-to-GDP ratio has grown sharply since 2010, which has meant a large share of their tax revenue are allocated to pay interest on debt.”

One of the regions where digitization of payments has taken off is East Africa, particularly in Kenya and Tanzania, where mobile money platforms such as Mpesa have been widely adopted, largely due to high penetration of mobile phones and limited traditional banking infrastructure in these countries, which makes digital payments a more viable option for many people.

 “This effort was driven by the need to change the financial services design for low-income cohorts,” says Njuguna.

According to Mbuthia, African governments are applying interesting use cases to help scale payment services with the aim of engaging a broader customer base.

“Demand and supply considerations greatly affect uptake of payment technologies. When a country has extensive mobile penetration, the uptake of digital financial services will be higher,” says Mbuthia. “Factors affecting the supply side will include favorable regulatory regime, which would help scale up payments.”

Today, Africa is home to more digital financial services deployments compared to any other region in the globe, with almost half of the nearly 700 million individual users worldwide, according to the International Monetary Fund. 

Mobile money solutions and agent banking now offer affordable, instant and reliable transactions, as well as savings, credit and even insurance opportunities in both rural villages and urban neighborhoods where there are no bank branches.

“The uptake of digital technologies is uneven across Africa. Countries with stronger institutions and stable governments and relatively stable macroeconomic policies have made bigger progress in this area,” Gupta says. “For example, Kenya remains on the forefront in adopting digital technologies. Countries that are viewed as fragile, such as Burkina Faso and Niger, are slower in adopting digital technologies.”

Africa tends to embrace innovation at scale and leapfrog into the future of digital payments, according to Andres Pérez, director of the Fintech Association of South Africa, though some African countries do not have the correct banking structure to allow them to adopt traditional payment methods such as cards.

“In markets like Nigeria, for instance, the growth of instant digital payments compared to card payments or mobile point-of-sale (mPoS) has been dramatic. In the first two months of 2022 alone, almost $130 billion (53.83 trillion naira) was transferred through NIPS, compared to only $2.7 billion (1.15 trillion naira) processed through PoS terminals,” says Pérez.

In West Africa, countries such as Ghana, Nigeria and Senegal have shown a high degree of uptake, driven by a large young population, high mobile phone penetration and increased awareness of digital financial services, says Njuguna.

He adds that countries in the Southern Africa region, such as South Africa and Namibia, have been slower to adopt digitization of payments, due in part to a more developed traditional banking infrastructure and a lower mobile phone penetration rate.

“Also, some countries in the Central Africa region, such as Cameroon and DRC, have been slow to adopt digitization of payments, due to a lack of regulations and infrastructure, as well as a lack of awareness of digital financial services among the population,” says Njuguna.

Lavina Ramkissoon, founder of the Fintech Association South Africa, says the 21st century witnessed dramatic shifts on how people pay for goods and services as electronic payments are increasingly displacing cash and, more recently, cryptocurrency and digital currencies emerging as alternatives to traditional conceptions of money.

But a challenge remains.

For Africa’s digital transformation to be seamless, there needs to be a harmonized environment that guarantees investment and financing. This, Ramkissoon says, would close the digital infrastructure gap that exists in Africa, achieving accessible, affordable and secure broadband across demography, gender and geography.

“Let’s add to the mix the culture of cash and offline payments due to no internet connectivity or power outages This contributes equally to the landscape,” says Ramkissoon. “By default, this implies more lives are impacted, uplifted and included in digital transformation for the continent.” 

When Zambia sought relief on its $17.27 billion debt owed to 44 lenders, China canceled $1.6 billion of the $5.78 billion it lent to the African nation, according to Zambia’s Ministry of Finance and National Planning.

The decision paved the way for the country to access a bailout of $1.4 billion from the International Monetary Fund (IMF) over the next three years. The IMF initially said the funds would only be disbursed if the country’s creditors agreed to a debt restructuring. 

The debts have triggered a repayment crisis, paving the way for more restructuring under China’s aegis. World Bank data shows that Africa’s biggest bilateral creditor, China, held 21% of the continent’s debt in 2021. Since 2010, Chinese financial institutions have funded an average of 70 projects in Africa annually, according to India’s The Economic Times. But the projects have often proved more costly than predicted.

In July 2020, the Nigerian parliament raised the alarm over the commercial loan agreement signed with the Export-Import Bank of China, which allegedly conceded sovereignty in a $400 million loan to improve broadband infrastructure signed in 2018.

The $4 billion Addis Ababa–Djibouti Railway cost Ethiopia nearly a quarter of its 2016 budget of $12.57 billion, while the Mombasa-Nairobi line in neighboring Kenya was four times over budget. China financed 80% of the Kenyan railway and holds approximately 67% of the country’s $36.7 billion external debt, according to Kenya’s treasury.

Trap or Miscalculations?

China attracts much criticism due to a lack of transparency. Its practices, dubbed “debt-trap diplomacy” by critics, have fostered dependence on Beijing.

However, Maria Adele Carrai, an assistant professor of Global China Studies at NYU Shanghai, counters that most African countries solicit investments and financing from China for specific infrastructure projects. Beijing does not dictate how a host nation invests the credit.

“China relies on host countries’ requests, and this often leads to the poor calculation of risks and economic returns, and the construction of white-elephant projects,” she says. “However, under the increased international scrutiny and criticisms, China—including its lenders—have become much more cautious.” 

Some African nations have reached the limits of their borrowing capacity, and the prospect of default looms large. The IMF lists more than 20 African countries as being in, or at high risk of, debt distress. 

Currently, 18 African states are renegotiating their debts, while 12 others are talking with China to restructure approximately $28 billion in loans.

For example, in January 2021, Angola secured three years of payment relief from Chinese creditors. Africa’s second-largest oil exporter, the country is struggling to overcome a hit from the coronavirus pandemic, heavy debt-service requirements and volatility in the oil sector.

In June 2021, Chinese President Xi Jinping agreed to reschedule Congo Republic’s debt, preventing the Central African country from resuming negotiations with the IMF.

On September 6, 2018, China agreed to restructure some of Ethiopia’s debt, including the $4 billion loan for Addis Ababa–Djibouti Railway.

The country’s aid agency, and the Export-Import Bank of China, the official bilateral creditors have suspended $1.4 billion in debt service payments from 23 countries under the G20 Common Framework, according to a statement made by China Finance Minister Liu Kun Liu.

China has also made two specific commitments on debt relief, including the G-20 Debt Service Suspension Initiative for Poorest Countries—disproportionately found in Africa—reached by finance ministers and central bank governors on April 15, 2020. That saw China suspend principal repayments and interest payments starting May 1, 2020, until the end of 2020 for all IDA-eligible countries. Of the 74 poorest countries presently benefiting from IDA financing, 39 are in sub-Saharan Africa.

However, when China bails out distressed governments, it often does require the same harsh reforms as the IMF does, Bradley Parks, an executive director at research organization AidData, told the Financial Times. “It effectively kicks the can down the road and leaves it to others to solve the underlying solvency problem.”

Nevertheless, China’s two main policy banks, China Eximbank and China Development Bank have now adopted increasingly hard-line lending terms. 

Tang Xiaoyang, chair of the department of international relations at Tsinghua University in Beijing, blames reckless international financial institutions for the debt stress experienced by African countries.

Since 2016, developing countries have been facing steadily rising debt pressure due to multiple external factors, including severe fiscal deficits, falling commodity prices, declining international demand, the Covid-19 epidemic and so on, according to Xiaoyang.

“International attention has largely focused on non-Western emerging lenders, for instance, China, and has put forward factually ungrounded arguments like ‘debt trap,’ while seriously undermining the impact of international bonds on sovereign debts,” he says.

With hopes that it will mitigate rising food prices due to the ongoing Russia-Ukraine crisis, trading on the new business-to-business e-commerce platform Africa Trade Exchange (ATEX) started on May 11.

The crisis has created shortages in maize, wheat, other grains and fertilizers in several African countries, which are disproportionately net food importers and receive more than 80% of their wheat and maize from Russia and Ukraine.

“The conflict impacts on food security in Africa through availability and pricing in some food crops, particularly sunflower and wheat, as well as growth and socioeconomic recovery, triggered by soaring uncertainties in supply chain systems and global financial markets,” agrees Nardos Bekele, CEO of African Union Development Agency-NEPAD.

“One of the issues we’ve realized during this Covid-19 epoch is the importance of possessing credible supply chains, and one can’t have credible supply chains unless businesses are working together,” adds Francis Mangeni, head of Trade Promotions and Programs at the African Continental Free Trade Area (AfCFTA).

Facilitating trading between buyers and suppliers within the $2.5 trillion economic bloc, ATEX improves cross-border trade and provides businesses with quality products from verified African suppliers while reducing average trading costs based on AfCFTA rules and improving efficiency.

“The Russia-Ukraine crisis has increased the strain on critical supply chains in commodity markets, with current and expected price increases in agricultural products and inputs such as cereals and fertilizers,” the United Nations Economic Commission for Africa (UNECA) said during ATEX’s launch

Developed by the African Export-Import Bank (Afreximbank) that serves as a broker for most of the payment systems and logistics, including the African Development Bank and collaborating with the AfCFTA Secretariat and the UNECA, ATEX’s other objective is to let buyers and sellers access the details of AfCFTA rules, procedures and resources, allowing them to locate potential supply chain partners.

Dr. Stephen Karingi, director of the Regional Integration and Trade Division of the Economic Commission for Africa, says, “ATEX promises a transformation in the Continent’s approach to trade and imports, particularly by expediting access for small and medium-size enterprises to the wider African market.”

Although the UK, France and Germany still exert significant influence on their former African colonies, a new wave of countries seeks to gain influence through growing diplomatic, economic and military ties with countries on the continent.

Russia, Turkey, Israel and the Persian Gulf countries are expanding their influence within Africa as has the US and China, marking a shift in the balance of power among non-African nations active on the continent.

There are now more external actors operating in Africa than ever before. Still, the new players cannot displace the former colonial powers, since the engagement level of the former remains relatively small, according to Steven Gruzd, head of the African Governance and Diplomacy Program at the South African Institute of International Affairs.

“The stage is crowded with both traditional and emerging players,” he says. “All are vying for trade, investment, markets, influence and political and diplomatic support. It has created more complexity and more choices of partners for African countries, who must navigate many competing interests. Africa’s raw materials and consumer markets are attractive to older and newer actors alike.”

For example, Turkey had 12 embassies in Africa in 2009 but currently has 43 embassies on a continent with 55 countries, exemplifying the diplomatic momentum coalescing around the new players.

Russia, meanwhile, has aggressively pursued strategic objectives in Africa, such as securing a foothold in the eastern Mediterranean, gaining naval port access in the Red Sea, expanding natural resource extraction opportunities and promoting alternatives to democracy as a regional norm.

The expansion of these states’ activities in Africa hinges on bilateral relations born from a genuine belief that any relationship formed positively affects the continent.

“In the past, exploitative commercial interests singularly underlined the lopsided relationships involving the colonial powers and their colonies,” says Tinashe Nyamunda, an associate professor in the department of Historical and Heritage Studies at the University of Pretoria (UP). “Today, the emergence of new relationships is not an indication of a shift in the balance of power but rather a confirmation, African states no longer play blind obeisance to Western influence.”

China has been the largest investor in Africa in the last decade, followed by the US, France, Turkey, UK, Germany, India, Japan and the UAE, according to the Swiss-African Business Circle’s Swiss-African Business Relations Status Quo 2021 report.

Relations formed in the early stages of African states’ independence began with the Berlin Conference of 1884-1885, which regulated European colonization and trade in Africa during the colonial expansion by Europe, the United States and Japan during the late 19th and early 20th centuries. Today, the countries are forming symbiotic relationships where commercial interests drive the agenda.

“It’s not really a shifting balance of power when we see countries from other regions that were not associated with colonialism receiving a warm reception in African capitals,” notes Winnie Rugutt, a tutorial fellow in the department of Diplomacy and International Studies at the University of Nairobi. “It’s about economic gains and not about flexing global power. These emerging economies drawn from the Arab World, Eastern Europe and Asia see Africa as the next prospective frontier for doing business with mutual benefit for engaging states.”

Former colonial powers have not sat on their laurels, as they have aggressively tried to solidify their grip on former colonies. Take France, for example: In 2017, President Emmanuel Macron committed himself to recast France’s relationship with Africa during a visit to Burkina Faso. Four years later, Macron hosted the New France-Africa Summit in Montpellier, France on October 8, 2021, to showcase the policy’s results.

“The influence of the traditional powers from the West will not evaporate overnight. They have invested within the continent for a long time by engaging in public diplomacy where the tool of the trade is to win the hearts and minds of a populace, and they have verifiably succeeded,” says Rugutt.

In 2001 at the age of 39, Vodacom employee Nkosana Makate invented the popular “Please Call Me” functionality (PCM) allowing African consumers to communicate even when they lacked the means to pay for a phone call. But he failed to secure the intellectual property rights to his invention.

“Inventors as creators of intellectual property are not always savvy and sophisticated individuals. They are therefore often vulnerable to exploitation by big business which is able to see and smell the potential of a game changing invention from 10,000 miles away,” notes William Maema, an intellectual property and technology attorney with global law firm DLA Piper.

This lacuna played into the hands of Vodacom Group PLC, the local subsidiary of the second largest mobile network operator in the world, namely Vodafone Group Plc.

As Africa’s second largest mobile operator, Vodacom initially denied its ex-employee was the inventor of the service, and then claimed he was not entitled to any financial compensation.

So Makate took Vodacom to court and litigation dragged on for years. In 2016, the case ended up in South Africa’s highest court, the Constitutional Court, which ordered the two sides to negotiate an agreed compensation.

Vodacom—which has a footprint in 32 African countries—offered to pay Makate what it described as an “overly generous” $3.1 million, but the inventor demanded over $1.2 billion in compensation, arguing that the figure constituted 5% of revenue from the service over two decades.

Makate’s 21-year quest for just compensation is nearly over with the South African High Court’s February 7 decision ordering the telco to pay him 5% of the total voice revenue generated by the product over the past 20 years.

“To me, it is clear Vodacom is defying the Constitutional Court order to act and negotiate in good faith,” said presiding Justice Wendy Hughes.

Additionally, Judge Hughes’ ruling gave Vodacom CEO Shameel Joosub one month to make a new determination of appropriate compensation for voice call revenue generated from PCM.

“That total voice revenue includes PCM revenue derived from prepaid, contract (both in bundle and out bundle) and interconnect fees as set out in the second respondent’s annual financial statements,” the ruling stated.

The court added that Makate was entitled to 27% of the number of PCMs sent daily as being revenue generated by return calls and that he should be awarded “the time value of money calculated at 5% for each successive year.”

The court left it to Vodacom CEO’s to determine the annual effective rate—which would blend the effective contract rate and effective prepaid rate—to help determine Makate’s compensation.

Ngozi Aderibigbe, a Partner and Head of the Intellectual Property Practice of Nigerian-based law firm Jackson, Etti and Edu, insists that new technology companies in Africa must tick off two essential items on their checklists when introducing a new invention to the market or adapting one for their operations.

“Both for employees and inventors on contract, there must be an adequate compensation plan and a proper assignment of the IP rights in the patent. Nonetheless, one thing is certain—more inventors hoping for the big paycheck will be filing lawsuits to enforce their rights, leading to an inevitable rise in patent disputes against technology companies,“ she says.

“Businesses thrive on intellectual property to make huge profits. They have the wherewithal to exploit an invention which, to the creator, means nothing or very little at the time. Because IP is an intangible asset, it is also very easy to steal or undervalue,” adds Ngozi.

DLA Piper attorney William Maema summed up the broader significance of the decision saying, “The biggest outcome of the South African case is the impact it will have on the bargaining power of Inventors of intellectual property and the sensitization of inventors to insist on getting a fair share of the product of their intellectual effort.” 

Just one day after electric-vehicle manufacturer Rivian’s blockbuster IPO, which gave the auto company a market valuation larger than GM’s, another upstart auto-industry company went public, vaulting a 26-year-old inventor into the ranks of industry titans.

Alex Rodrigues became the youngest current CEO of a US-based publicly traded company on November 11 after the trucking software company he founded, Embark Trucks, went public on the Nasdaq stock exchange—by way of a merger with special purpose acquisition firm Northern Genesis Acquisition Corp II. The pricing put the company’s value at about $5 billion, making Rodrigues worth an estimated $500 million.

Rodrigues co-founded the company in 2016 with Brandon Moak, also 26, a tinkering partner from the engineering program at the University of Waterloo, Canada. As undergraduates, the duo created an autonomous golf cart named Marvin and soon dropped out, moving to San Francisco. School was “a little bit boring,” Rodrigues told Freightwaves, a logistics trade publication. “You learn a lot of math and build very few robots,” he commented. “I wanted to go build more robots.”

Their autonomous golf cart became the starting point for Varden Labs, the precursor to Embark, and Rodrigues earned a Thiel Fellowship. With the two-year $100,000 grant, he and Moak were able to focus on building robots, which, according to Moak, got “larger and larger” until they “landed on self-driving trucks.”

Growing up in suburban Calgary, Rodrigues was widely considered precocious as an inventor; he built his first working robot in seventh grade at the age of 11. Rodrigues mentored one of Canada’s top early robotics teams while a student at Waterloo. He says competitive robotics shaped the approach at Embark, especially when fundraising with big names like Sequoia Capital. “In academia, you’re measured on the novelty of your approach,” he told Freightwaves. “In competition robotics, you’re measured on the performance.”          

With an investment worth over 4 billion rand (about $280 million at that time), Amazon announced in April that it would open its Africa headquarters in Cape Town, South Africa, saying it envisioned creating 5,239 jobs there in the construction phase of the project. Local politicians celebrated, with Alderman James Vos saying the investment opens “the door for many more investments in the IT and tech space.”

Also in April, sub-Saharan Africa’s second-largest economy won a 2021 award as the top global location for business process services, inspiring Malebo Mabitje-Thompson, deputy director general in the Department of Trade, Industry and Competition of South Africa, to say the accolade “confirms that South Africa is a notch above the rest as an investment destination with talent, technology and know-how.” In U.S. News & World Report’s 2021 Best Global Universities rankings, the top five institutions on the African continent were drawn from South Africa.

However, at present, the “rainbow nation” suffers from turbulent politics, which erupted following the July 7 arrest of former South African President Jacob Zuma for failing to cooperate with corruption investigations. The subsequent rioting will cost the country about 50 billion rand in lost output, Bloomberg estimates; while it will put 150,000 jobs at risk, according to the South African Property Owners Association.

World Bank data show more than half of the country’s 60 million people live in poverty and close to half (44.9%) faced “moderate or severe food insecurity” as of 2019, the most recent data. One in five South Africans lives on less than $1.90 a day according to the UN Human Development Report 2020. Inequality has soared since apartheid ended in 1994, and is expected to worsen.

“South Africa remains a dual economy with one of the highest persistent inequality rates in the world,” World Bank researchers wrote in a March report. “High inequality is perpetuated by a legacy of exclusion [and] inequalities are passed down from generation to generation with little change over time.”

South Africa’s unemployment rate, for example, surged to the highest in the world on a global list of 82 countries monitored by Bloomberg that was released in August. Over two million people lost their jobs in 2020 as a result of the pandemic; but unemployment has long been a problem, even during the three peak years when GDP was expanding at more than 5% annually.

In order to tackle the poverty, unemployment and inequality bedeviling South Africa, the country needs to register 5% annual increment in economic growth, says Thabi Leoka, a South African economist. Leoka expects annual growth of about 4% in 2021, settling into around 2% thereafter, but projections are vulnerable without reform.

Adding economic growth should also be equitable, since the country has had periods of strong growth prior to the global financial crisis. “But growth did not significantly reduce the unemployment rate, nor did it result in an equitable society,” she says.

“Basic services have crumbled in much of the country and the government is corrupt and inefficient,” says Benjamin Fogel, a historian at New York University and a South African national. “This, combined with ongoing racial and ethnic divides, makes the country a tinderbox.”

Dawie Roodt, a South African economist for Efficient Group, blames the malaise on the African National Congress (ANC) Party. “Because of many years of mismanagement, state-owned enterprises have been driven to the ground financially and operationally,” he says. “The fiscal accounts have become unsustainable, and confidence in government is at an all-time low. To fix these issues, strong leadership is required; but because of the ANC patronage system, it’s politically very difficult.”

Saying inequality worsened as a consequence of systematic failures at government level, Jacques Nel, head of Africa Macro at NKC African Economics, adds that “systemic failures at a government level” exacerbated the situation. It’s not just income inequality that is a problem, but unequal access to essential public services.

“One would have thought that 25 years into democracy we would not have children falling into pit latrines due to failures in the provision of ablution facilities,” he says, “and that we would have better access to health care and to land.”

July’s riots were a flashpoint. The extent of the turmoil, according to Andreas Freytag, a senior research associate at the South African Institute of International Affairs, “exposed South Africa’s underlying economic problems, including high rates of unemployment—above 64% for those under the age of 35.”

President Cyril Ramaphosa dismissed the riots as a failed insurrection by Zuma supporters. Zuma, 79, whose tenure as president was marked by scandal, was incarcerated after his July arrest at Estcourt prison located in KwaZulu-Natal province, his political base. He has since been released to an undisclosed hospital on medical parole, where he remains at the time of this writing, and is expected to be remanded to the community corrections system. He is under a 15-month jail sentence for contempt of court, for refusing to appear at an inquiry into corruption during his nearly nine years in office that ended in 2018.

According to Biniam Bedasso, a senior research associate at the Center for Global Development, South Africa’s structural economic and political tensions had long been simmering. South African commentators, he says, often talk about the triple challenges of poverty, inequality and unemployment. The Covid-19 crisis added fiscal sustainability to the list.

The government will find it rather difficult, with so little fiscal leeway, to address the long-standing grievances that contributed to the unrest. However, the immediate cause—the jailing of former president Zuma—suggests that judicial institutions are resilient and public accountability is returning after a period dominated by corruption and impunity.

Leoka says the South African government needs to implement growth-inducing policies. The problems faced by state-owned electricity utility Eskom for more than a decade, and the rippling disruptions they have caused to industry, are one example of the need for reform. The National Treasury identified network industries, energy, transport and communications, which are currently dominated by ailing state-owned companies, as priorities for fresh competition to improve efficiency and reduce prices.

“Barriers to entrepreneurship need to be lifted; and support needs to go to small businesses and the informal sector, which is currently only 16% of the economy,” says Leoka. “The quality of education needs to improve, and there need to be multiple channels of job attainment instead of going through university in order to get a job.”

Meanwhile, as Andile Makholwa, external communications manager for Absa Group, notes, although the unrest has abated, the underlying challenges remain.

“This growth trajectory is slightly weaker than we had forecast,” he says. “Although economic activity in the first half of 2021 was stronger than expected, growth momentum had been softening even before the negative effect of the third wave of the Covid-19 pandemic and the outburst of violent unrest.”

And since the South Africa economy is highly integrated with the global economic system, the fate of the country will largely depend on global trends, with perhaps significant benefit from an increase in global demand for commodities due to post-Covid recovery in many parts of the world.

“There is no guarantee that any gains from economic recovery would not be squandered just like the surpluses from the last commodity boom in the early 2000s were squandered,” says Bedasso. “The highly polarized political environment within and outside of the ruling party should give way to more constructive dialogue on how to address the backlog of societal ills.”