9.11.2012. Africa, once “The Forgotten Continent”, appears to be slowly becoming something to remember. GDP growth, establishment of multinational companies and many other improvements are the new reality. Is Africa the new India and China of ten years ago?
Africa has been experiencing unprecedented economic growth which is accompanied (and partly stems from) massive inflows of investments. According to the African Development Bank, the continent grew by 4.9 % in 2010 and it is expected to grow by 6.2% in 2020. Those numbers are even more impressive when compared to the so-called emerging economies such as Russia and Brazil (4,3% and 2% of growth respectively in 2011). Interestingly, the current growth is taking place when many advanced economies, such as France or Canada, are either still going through a post-financial crisis trauma or have only begun to recover. The bottom line is this - majority of the 10 fastest-growing economies are Africans.
Since 2005, FDI (Foreign Direct Investment) has increased by 50% in sub-Saharan Africa. In 2009, AES, an American supplier of electricity, became the key operator in Cameroon, in March, Massmart, one of the biggest retailers in South Africa was acquired by Wal-Mart. There are many other quite spectacular examples. Besides the amount of web infrastructure invested by Google and more than 20 IBM’s offices spread in African countries, J.P. Morgan has recently added Nigeria to its government - bond index for emerging markets, which is expected to attract US$1.5 billion .
Judgments toward this sort of growth are considerably accepted, especially when most of the population in Africa remains poor and faces extreme risk of food scarcity. Nevertheless, analysts, including skeptics, remain positive about the current situation. A new research paper released by two World Bank economists argues that “middle income” can be defined as more than $1.000 income per capita (annually). Thus the current position of Africa, as a whole, with an average income of $1.700 should perhaps be seen in a different light. In addition to this point, McKinsey and Co. have established that Africa has more middle class consumers than India, which is considered an emerging economy with annual growth of 6.9%. At the current growth rate it implies that consumer spending in Africa will increase from $680 billion in 2008 to $2.2 trillion by 2030.
A World Bank researcher, Wolfgang Fengler, names four reasons for this recent growth in Africa: population growth, rapid urbanization, technology and governance. According to the United Nation, by 2055 Nigeria will surpass United States, being the third most populous country after India and China. As urbanization grows and efficiency rises the African cities will be attracting more foreign capital. Technology has been also instrumental in sustaining African growth – its effects are particularly strong since the continent is taking off from a very low base. In the last decade the use of telephones grew from 0.7% to 70%. Even the governance which is hardly Africa’s biggest asset - became modestly better.
The future of Africa will be definitely defined by incoming foreign investments and skilled workers capable of dealing with new technologies. Development and growth are within reach and African continent is turning from “forgotten” to closely followed.
Sources: www.economist.com, www.theatlantic.com
Picture: The McKinsey Global Institute
Lucas Cury de Farias