Africa is booming as renaissance finally gets under way
AFRICA IS taking off. After decades of disastrous economic underperformance, the planet’s poorest continent is booming. The long hoped for “African renaissance” appears finally to be under way.
The change has been dramatic. As the accompanying chart illustrates, the continent was going nowhere in the 1980s. Growth was lower than all other regions, and average incomes were falling as population growth outstripped economic growth. But growth accelerated in the 1990s, first overtaking rich world rates and then the global average.
With the exception of 2009, when the Euro-American crash took the wind out of its sails, sub-Saharan Africa has grown by 5-7 per cent annually every year since the turn of the century. Only Asia has done better.
And almost all of sub-Sahara’s 45-odd economies have participated. Eleven have more than doubled in size. Only one – Zimbabwe – has contracted.
Soaring commodity prices have been a major factor in driving growth in resource-rich Africa, but it is not the sole reason by any means. The McKinsey Global Institute has disaggregated the continent’s GDP data to see which sectors have been generating the expansion. They find that less than one third of growth was accounted for by resources in 2000-08. This gives further reason to believe that Africa’s take-off is not fuelled only by high commodity prices.
Telecoms, retail, manufacturing and agriculture are contributing to growth. And there is plenty of potential for other sectors too. Tourism hasn’t contributed much, but it is important, accounting for one in 20 jobs south of the Sahara. Given the upward trajectory of tourism numbers globally (it is already sometimes called the world’s biggest industry) and the continent’s many unique offerings, the potential is huge.
As ever with economic performance, there is no agreement on why Africa is doing better, but there are many likely reasons, including less commerce-disrupting conflict and better health and education. Globalisation has been an important driver. Foreign trade and investment opportunities can act as an engine for growth. That is what has happened in 21st century Africa. UN figures show that sub-Saharan Africa attracted foreign direct investment of just under $50 billion in the 1990s. In the first decade of this century, inflows exceeded $200 billion. The export story is as encouraging. According to World Trade Organisation figures, Africa lost world market share over the 50 years to 1998, by which time its exports accounted for less than 2 per cent of the global total. The new century has brought the first sustained reversal in that trend in the post-independence era. Africa’s share of the world export market is back above 3 per cent.
Not only is African trade growth outstripping the strong global average, but markets have diversified. According to the International Monetary Fund, about two-thirds of the region’s trade growth in 2005-10 was accounted for by other emerging markets. From near total dependence on Europe 20 years ago, about half of Sub-Saharan Africa’s trade is now with the rest of the developing world. With such weakness in rich economies, more “south-south” exchange is the way to go.
China has played a particularly important role in Africa’s trade and investment booms. Illustrating the middle kingdom’s influence in the region better than any figures was the 2006 Africa-China summit when almost every African head of state travelled to Beijing to attend (they would never assemble en masse in Brussels or Washington).
Another factor boosting growth is better macroeconomic management. Budgetary discipline and control of inflation have improved. Better microeconomic policy is helping, too. Unnecessary impediments to doing business are gradually being removed and entrepreneurs face less red tape.
Although Africa remains the most poorly governed region of the world, policy outcomes have improved. This is mostly an African story, but the rich world’s aid programmes can take some of the credit. Debt relief has improved fiscal positions and the technical assistance and conditionality that comes with aid has raised the quality of governance.
The continent faces enormous challenges and a long journey to prosperity, even if the trends of the past decade and more can be maintained. But never in the post-independence era have its prospects been better.