New York Times story of McKinsey & Company report released 24 June in Johannesburg concerning Africa’s burgeoning economic growth. The report (“Lions on the Move”) states that “global businesses cannot afford to ignore the potential,” in part because it’s much more widespread than popularly realized.
Africa is often depicted as a place of war, disease and poverty, with a begging bowl extended to the world. But a new report paints a much more optimistic portrait of a continent with growing national economies and an expanding consumer class that offers foreign investors the highest rates of return in the developing world.
In a report released Thursday, McKinsey & Company, the consulting firm, presented a bullish message to companies, arguing that “global businesses cannot afford to ignore the potential.”
“The growth we’ve seen in Africa recently is much more widespread than is generally recognized,” said Arend van Wamelen, an author of the report based in Johannesburg for McKinsey, which advises domestic and international companies investing in Africa. “There are a lot of underlying good things going on in the economies.”
The report, titled “Lions on the Move,” includes an array of arresting facts from the firm’s business and economics research arm, the McKinsey Global Institute. Since 2000, 316 million people on the continent have signed up for cellphone service, more than the entire population of the United States; Africa’s billion people spent $860 billion in 2008, more than India’s population of 1.2 billion.
Some factoids: the continent now has more mobiles than the US (316m), Africa’s billion people spend more ($860B in 2008) than India’s 1.2B, and Africa grew twice as fast in the 00s than in the 80s and 90s. Only Asia and Africa grew through the Great Recession.
Africa’s economic growth is seen as a result of the boom in prices for its wealth of natural resources — oil, gold, platinum and diamonds, among others. As an example of that, the continent’s three largest oil producers — Algeria, Angola and Nigeria — earned $1 trillion in oil exports from 2000 to 2008, compared with $300 billion in the 1990s, the report found. But the McKinsey researchers also concluded that rising commodity prices directly accounted for only about a quarter of the increase in economic growth in the 2000s.
Economic growth accelerated in 27 of the continent’s 30 largest economies, resource-rich and resource-poor alike, they found. Those with great natural wealth grew at about 5.4 percent a year in the same period, while those not so well endowed grew at 4.6 percent.
McKinsey attributed Africa’s economic expansion to rising commodity prices, greater political stability aided by a reduction in violent conflicts, improved macroeconomic performance and market-friendly economic reforms.
China’s role is recognized in infrastructure development: its investments in that sector now outpace those of the World Bank.
Also impressive: the non-resource-blessed countries grew almost as fast as the resource-heavy ones (4.6% annually in the 00s compared to 5.4%). Inflation also dropped across the continent from an average of 22% in the 90s to 8% in the 00s. FDI shot up from $8b in 2000 to $62B in 2008. The demographics, despite AIDS, are decent: by 2040 Africa will have 1.1B working-age people—more than either India or Africa.
The great Achilles heel long term? Poor education systems, but here again I suspect the Chinese and Indians will move in, because both know how to teach at that socio-economic range.
“If Africa can provide its young people with the education and skills they need, this large work force could account for a significant share of both global consumption and production,” the report states.