Today, Africa, once dismissed as the ‘hopeless continent’ has metamorphosed into the ‘continent of hope’ – not only for itself but as the salvation for European economies struggling to keep their heads above water; and the rampaging Asian Tigers whose appetite for Africa’s resources and markets is becoming keener by the day.
“Remove Africa from the global equation today,” says Steven Jennings, CEO of one of the world’s biggest investment organisations, Renaissance Capital, “and look upon a landscape of broken and ruined economies.”
Over the past decade and a bit, Africa has indeed created more wealth and generated more sustained growth than it has ever done in its history. But, according to a new study, this is only just the beginning. By 2050, Africa’s GDP will equal that of the USA and the EU combined in today’s money and, in all probability, will begin outstripping the Asian growth rates. The study, The Fastest Billion, is lead authored by economist Charles Robertson and contains contributions by several other Africa-based economists and project directors.
While Africa’s sterling economic performance seems to have taken many commentators by surprise, the study says there is nothing unusual about the continent’s rapid upward mobility. It is simply following a pattern of global economic transformation that began roughly two centuries ago. Countries go through four stages of growth – from agrarian to industrial states, then to service economies, and finally into the age of the information economy.
“By 2050, Africa is set to be the final beneficiary of this revolution, and will become the fastest continent to reach the fourth economic stage,” says Robertson.
The process of growth has itself been accelerating. “What took the UK centuries can now be a matter of decades, or even years,” says the report. Moreover, technological transfer has never been easier, and adaptation to new technology, as in the case of astounding growth of IT in Africa, is quickest in ‘green field’ regions that do not have the baggage of previous industrial frameworks. Africa is therefore sitting in a very good place to leapfrog generations of technical advances.
The study predicts that Africa’s GPD will rise from the current $2 trillion to $29 trillion by 2050, and that some of the best performing African states will enjoy similar per capita incomes as Germany does today.
Africa, the study contends, is at a similar stage to developing South-East Asia in the 1980s and India in the 1990s, and is exhibiting matching trends in terms of accelerated growth. But Africa has added advantages that will allow it to outstrip the Asians over the next four decades.
These advantages are the vast reserves of essential natural resources and the ‘demographic dividend’. Africa’s population is young and this segment of the population will increase by 15 to 20 percent over the next decade at a time when both Europe and Asia will suffer a 30 percent decline in the same age composition. Growth follows youth, both in terms of productivity and consumption, and Africa’s population, unencumbered by the need to provide for an ageing, unproductive population, will have greater surplus income, and energy, to push growth charts further.
Urbanisation is a vital component in wealth creation as it tends to flatten out ethnic and regional differences, generates productive ideas and new skills, vastly increases demand (and supply) of goods and services, and produces greater efficiencies, economies of scale and productivity. UN Habitat estimates that 11 African cities will see population growths of over 50 percent from 2010-25 – a rate similar to that prevailing in China today.
While the spectacular growth of the Asian economies was based initially on the export of cheap manufactures, Africa growth has been underpinned by its commodity exports. For instance, oil revenues have increased from $1 billion in 1965 to $235 billion today, and the continent is on track to join the gas-producing giants in the near future. It is also set to become one of the leading producers of iron ore, coke, coal and even steel. It is already the world’s largest producer of cobalt and platinum and is among the top producers of gold, copper and diamonds. Kenya is the world’s biggest exporter of tea and, together with Ethiopia, flowers.
But what is significant is that commodities form only a third of the increase in Africa’s GDP. The other two-thirds come from services, manufacture and construction, which have led to a sharp rise in the continent’s new middle-classes.
Africa’s governance has improved almost out of all recognition and its macro-economic management has outperformed that of Europe, with very low public debt and generally a positive balance of trade. Research indicates that countries that achieve an average of $10,000 per capita income become ‘immortal democracies’ – in other words, they do not revert to autocracies. Botswana and Mauritius are already there and several more countries are about to join them.
Similarly, corruption is inversely linked to national income – the lower it is, the greater the amount of corruption. Many African countries are now reaching national income thresholds that are resulting in dramatic drops in corruption levels. While corruption will not be wiped off the continent by 2050, it is expected to become negligible over most of the continent, barring the least developed countries.
In addition, there have been substantial improvements in the provision of education and health care, and there has been a spate of infrastructure projects, including roads, railways, port and airport expansions, and large-scale housing. A number of new purpose built cities, like Tatu City in Kenya and King City and Appolonia in Ghana, are already in the process of being constructed.
Given Africa’s promise, it’s no surprise this vast continent has now become the investment destination of choice. Roll on 2050 – Africa’s time has come.
