Africa’s GDP could increase from $2 trillion today to $29 trillion in the next 40 years, according to one investment bank. Other forecasts are similarly optimistic. But is this realistic?
Africa’s economic history has been evolutionary, in growth as in related ways.
Today’s official spin on Africa’s is one of unrestrained optimism. In 2010 the World Bank saw Africa on “the brink of an economic take-off, much like China was 30 years ago, and India 20 years ago” – with caveats: on productive employment, the need to accommodate seven to ten million youngsters in jobs every year; on food insecurity; infrastructural deficits; power and energy deficiencies, with several fragile states stuck in the famous “low-level equilibrium trap”. Problematic caveats for sure: the devil is always in the detail.
By 2012 the image of the International Bank for Reconstruction and Development was watered down and showed little promise of improvement. In the Maghreb, Mali, Central African Republic, Sudan, South Sudan, Democratic Republic of the Congo and South Africa (Africa’s largest economy crawling at 2.3 percent annual GDP growth) the IBRD’s National Development Plan 2030 was already compromised. The African Development Bank (AfDB) joined the party, its Outlook 2011 punting sub-Saharan GDP growth at 6.2 percent in 2012, North Africa (with Sudan) to rack up 5.1 percent. The Arab Spring punctured this hubris, while in Africa 2060 AfDB postulated real growth rates of five percent annually, rising to more than six percent by 2020, trending on plateau for 20 years, edging down to five percent in 2060.
This ‘model’ yielded annual four percent growth per capita for a populace doubling over 50 years, without any blip – a heroic forecast – a testament to quasi-bureaucrats armed with computer-driven models. Already this prognosis has tarnished. Yet, officially, all is said to be well. Is it, really? This chorus of mandarins echoed an expanding world of companies in a bandwagon of assorted politicians, accounting firms, consultants, glitterati and wannabe pundits, rock stars and media alike.
IMF joined this choir, identifying Africa’s ‘fastest growth’ Top Ten economies for 2012 (proclaimed by one and all, to show Africa as the ‘world leader’) this time in growth accomplishment. Closer examination reveals this volume at $19 billion (about Botswana’s GDP, or Afghanistan’s, or 3.6 percent of Belgium’s, or 0.23 percent of China’s: almost a statistical error) – not exactly any game changer on a world scale.
Rating agencies embraced this boondoggle. Moody’s said the pace of growth has fundamentally altered. Funds, with ‘funds of funds’, lined up capital. Private equity shifted gears. The continent was at a historic turning point, the corporate giants having ‘discovered’ Africa; India ‘re-discovering’ old hunting grounds. China was driving the trade and commercial upside. The Brics were piling into this last frontier, itself but a briquette at less than two percent of world GDP. It was the next big thing. MasterCard Worldwide said the same thing.
Many economic drivers would shape the inevitable fast-track route forward, including rapid urbanisation, mythic ‘demographic dividends’, rising consumer income, economic hubs and growing markets. Few corporates could ignore this seductive message. Optimism became infectious. “Why not a ten percent growth rate?” one economist said, while the emulation of China was “on the cards”, remarked another. Africa is “probably the most significant investment and growth opportunity on the planet”, opined another.
The award for bullish optimism goes to Renaissance Capital: an uber-upbeat report in 2011 signalled epic economic shifts in motion, views captured in The Fastest Billion. It was easier than ever to catch up, RenCap asserted. Others had done so, why not Africa? Sub-Sahara outside South Africa would reach $4.5 trillion GDP by 2030, assuming nominal growth at ten percent per annum, on an unstoppable pathway of six to seven percent real growth forward. This rate might even be conservative, it coyly intimated: heady stuff.
Indeed, Africa’s GDP would increase “from $2 trillion today to $29 trillion in today’s money by 2050”, then “Africa will produce more GDP than the US and Eurozone combined do today”. Yet if Africa’s best-historic 40 year cycle growth prevailed, GDP would be nowhere near these prognoses. On ‘at best’ measured shorter 20-year cycles (3.8 percent growth per annum), GDP would only sum to $8.9 trillion – far short of dreamtime numbers built on over-rich projections.
Demographics (rising from one to two billion by 2050), massive urbanisation, an expected sub-Saharan Africa “growth acceleration to seven to eight percent annually for the next four decades, with nine percent for the lowest-income countries in the 2020s, and double-digit growth over 2030-50” are touted. Like a genie out of the bottle, blind optimism devoid of grounded realities is a phenomenon that can rarely be re-bottled. Two problems emerge: mathematics and cyclical history, and the teleological certainty about adopted-adapted models of linear-led, stage-by-stage revolution, paraded as inevitable renaissance, as a clear rejection of the de facto evolutionary track record.
Consider some numbers first. To grow from $2 trillion to $29 trillion by 2050, discounting inflation, and in real terms, Africa’s GDP would require annual compound growth in excess or almost double any historic long-run cyclical period achieved over its 2,000 years of recorded economic data, based on Angus Madison’s calculus. Never before has this been done. The best real-terms cycle found has been 4.8 percent for 2000-10.
One lesson from the record is clear – the longer the period measured, the lower the real growth rate achieved. There is no inevitability about 40-50 year trends forecast by RenCap or AfDB, even if only sub-Saharan. The projected revolutionary growth path would require no reversion to type, an absence of recidivism shaping the future, undiluted linear growth certitude, sustained inter decades progress with best-of-best socioeconomic circumstances prevailing and stability across 55 nation states, plus benign growth worldwide, as a vanilla-driven nirvana on a stairway to heaven.
At the heart of the rosy scenario is found the 1960 Rostow model as the ‘stages of economic growth’ syndrome. In the applied narrative, Africa emerged from traditional society between 1960 and 1980, even while 70 percent of Africa remains connected to agrarian modes of subsistence. The pre-conditions for take-off are assumed set, typically needing modernity to dominate the traditional, and presupposed continental economic flight within ten to 50 years.
Take-off is presumed as somehow different for Africa, Renaissance argued – services-led, not based on manufacturing as the engine of growth, or even resource exploitation. Was Africa unique, its future so different? Why? Here automatic stage succession is presumed even amidst a large pre-modern milieu – as Africa mastered the growth paradigm, demographics would offer an unchallenged competitive advantage, notably over Asia, and the fire of youth would ignite the continental economic machine, not its presidential palaces.
High economic growth would, however, need sizeable investment rates, typically at 25 percent of GDP, consistently so for 40 years, in order for the seven to eight percent long-run benchmark growth rate to be reached. Few countries had done that ever before. Why would Africa or its myriad of states differ? Here the ‘catch-up theory’ of economics is invoked. The critics had it all wrong.
Africa could leapfrog the implied trajectory, unlike past winners in the long slog to modernity.
Even weaknesses in infrastructure and bottlenecks in energy and power would be eliminated in time to raise the trajectory further. What could possibly go wrong? Was this good news synchronous confluence of likeminded views, discovered via empiricism and knowledge anew, drawn from divergent sources of erudition, depth and truth – or merely the collective effect of the growing choir of economists, politicians and fellow travellers singing aloud on song? Time will tell.
Undoubtedly Africa will grow, as before, in an evolutionary manner, despite and not because of its poor politics, as economic modes dominate state deficiencies, and balkanisation under irredentist pressures fracture the body politic of contemporary nation states.
