Month: May 2013

The African Miracle

On every important measure, life throughout Africa is getting better

There has been a sustained surge in economic growth across Africa. There is a strong link between economic and political progress, and the two tend to be mutually reinforcing. For decades, bad economics and bad politics fed off each other in Africa. The continent appeared to be trapped in a vicious circle of decline. Now it looks to be in the early stages of a virtuous cycle as the institutional, political and security underpinnings of economic growth strengthen.

A foundation stone for the African renaissance has been greater security in a region that has been plagued by violence since wars of independence began in the middle of the last century.

Now the continent is becoming less bloody. In the 1990s, there were 328,000 fatalities in conflict in sub-Saharan Africa, according to the Conflict Data Program at Sweden’s Uppsala University. In the 2000s, fatalities were down by between a half and two-thirds.

Another indicator of the declining propensity to violence is the frequency with which political leaders are overthrown. According to the Economist Intelligence Unit, there were 17 coups in the 1990s, but just six in the 2000s – the lowest for any decade since independence.

Fears that the sudden death last August of Ethiopia’s long-standing leader, Meles Zenawi, would unleash violent political turmoil have proved unfounded.

Sub-Saharan Africa remains one of the most conflict-prone regions of the world, but it seems to be becoming less so. The bedding down of democracy in many countries is one reason for this.

Elections are held more frequently and in more countries. And those elections mean more. In the last century, only three African leaders walked away from power after losing elections. Since 2000, it has been very different. Since Abdou Diouf accepted his rejection by Senegalese voters in March 2000, peaceful transitions have become almost commonplace, at least in western and southern Africa. MaliGhanaBeninCameroon, and Nigeria have all enjoyed peaceful transitions, as have NamibiaSouth Africa,Botswana and Zambia in the south.

Elections mean little if the politicians who win them then misuse and abuse power but here again improvements are taking place. The Mo Ibrahim Foundation, established by a Sudanese entrepreneur with a loathing of corruption (and on whose board Mary Robinson sits), measures the quality of governance in all African states. It finds that in a big majority of countries the state is serving citizens better now than when the foundation first started measuring such data in 2000.

One link between politics and economics is the middle classes. They have long been associated with political stability. When people have a stake in society, they are less inclined to want to tear everything down. Middle classes not only provide democracy’s ballast, they are the drivers of economic growth via their entrepreneurial dynamism. With more middle class households in Africa now than in India, the rise of Africa’s bourgeoisie augurs well for the future.

By almost every measure – of health, wealth and education – and for most of its people, life in Africa is getting better.

Just slightly over a decade ago, former British Prime Minister Tony Blair declared “The state of Africa is a scar on the conscience of the world.” Times have changed since then. Africa is now the go-to continent. Africa is no longer gloom and doom. Africa today is alive with rising urbanization, ever expanding consumer-middle class, and foreign invest business deals.

Investment, growth in Africa is similar to that of China at the beginning of the 2000s. Like Asia, Africa was one of only two regions where GDP rose during 2009’s global recession. Inflation fell to an average of 8 percent in the 2000s after a decade during which it hovered at 22 percent. African countries have lowered trade barriers, cut taxes, privatized companies, and liberalized many sectors, including banking. Africa now has more than 100 domestic companies with revenue greater than $1 billion. Capital flows to the continent which were $15 billion in 2000, are now slightly over $100 billion in 2012. All this leads to Africa offering the highest rate of return on investment of any region in the world.

Revenues from natural resources, the old foundation of Africa’s economy, directly accounted for just 24 percent of growth during the last decade; the rest came from other booming sectors, such as finance, retail, agriculture, and telecommunications. The fastest-growing demand for these raw inputs comes from the world’s emerging economies, with which sub-Saharan Africa now conducts half its trade. Africa’s production of oil, gas, minerals, and other resources is projected to grow at 2 to 4 percent per year for the next 10 years. At current prices and depending on how commodity prices rise, value of resource production will be $540 billion by 2020 or higher. Not every country in Africa is resource rich, yet GDP growth accelerated almost everywhere. New data on Africa shows Sub-Saharan African countries continue to grow at a strong pace

Africa’s urbanization is also increasing demand for new roads, rail systems, clean water, power generation, and other infrastructure. In 1980, just 28 percent of Africans lived in cities. Today, 40 percent of the continent’s 1 billion do, a portion close to China’s, larger than India’s, and likely to keep growing in the coming years. The number of households with discretionary income is projected to grow 50 percent over the next 10 years to 128 million. Already, Africa’s household spending tops $860 billion a year, more than that of India or Russia. And consumer spending in Africa is growing two to three times faster than in the wealthy developed countries and could be worth $1.4 trillion in annual revenue within a decade. The African middle class stands over 300 million. Thats about the size of the Indian middle class.

Multinational companies have already shifted their mindsets, even if the political world is still used to thinking of Africa as a charity case. Telecom firms have signed up 316 million new African subscribers since 2000, more than the population of the United States. Walmart recently bid $4.6 billion for one of the region’s largest retailers, confirmation that global businesses think Africa holds commercial potential on a scale not seen since China opened up more than 20 years ago. Those prospects will only grow as Africa urbanizes; already, the continent is home to 52 cities with populations of at least 1 million, as many as in Western Europe today.

Contrary to the pessimistic predictions of French agronomist René Dumont in his 1962 book “False Start”, Africa, with its prime geopolitical position and access to raw materials, seems well on its way to becoming the future granary and workshop of the world, with one billion workers and consumers. The continent is home to 60 percent of the world’s uncultivated arable land. So if farmers brought more of it into use, raised the yields on key crops to 80 percent of the world average, and shifted cultivation to higher-value crops, the continent’s farmers could increase the value of their annual agricultural output from $280 billion today to around $500 billion by 2020. Africa also has unique comparative advantages, which means considerable room for growth. It possesses half the unused arable land in the world, and its low yields, less than a metric ton (2,204 pounds) of cereal per hectare (1 hectare = 2.47 acres), mean that production growth could put an end to the food insecurity and malnutrition that currently affects one-third of all Africans.

The future looks bright for the African continent whether, it is political, economic or social. The best is yet to come. More people are being educated, adventuring around the world, meeting new people, trying-experimenting with new ideas, which only lead to better outcomes. This runs counter to the usual reporting in the news about famine, military coups, political instability and economic malaise, which is true to some parts, but does not paint the whole picture. With government reforms, greater political stability, improved macroeconomics, and a healthier business environment, it is hard to not feel a sense of optimism. Yes, challenges do remain but overall the continent and it’s people are doing better and future looks bright.

Japan exceeds expected investment in Africa

Japan has exceed its investment in Africa from an expected investment of $3.4 billion to over $6 billion, two years ahead of schedule. This push by Japan in investing throughout Africa is in reaction to Indian, Chinese and South Korean investment as previously reported on. Koichiro Matsuura, a former UNESCO secretary general, said the huge Japanese injection went into expanding business opportunities in African nations. Investment in Africa, has created employment, expanded trade and investment and promoted political stability for peaceful atmosphere for foreign investors leading to Africa’s economic development said Matsuura.

 This lecture came from Matsuura, ahead of the Fifth Tokyo International Conference on African Development (TICAD V), which will take place in Yokohama, Japan, from June 1 to 3, 2013. TICAD V seeks to consolidate the shift in terms of the relationship between Japan and Africa from one historically premised on development aid to one designed to facilitate higher levels of trade and investment. TICAD was initiated by Japan in 1993 with the support from the United Nations, the World Bank, the United Nations Development Programme and the African Union Commission.