Tracking the future. Daniel Silke
news is that the African workforce is growing in greater proportion to that of other continents. This means that the workforce, if adequately trained and integrated into the demands of the global economy, can become a sought-after commodity. With a decline in the number of work-active humans across the developed world, the future of the global workforce might be in China and India until 2030, but for long-term investors beyond that Africa will be sought as a pool of human talent.
Along with the broader trend of mass urbanisation across the planet, urban growth rates in Africa are now the highest in the world. By 2050, 61 percent of Africa will be urbanised (from an estimated 38 percent currently). African cities are swelling rapidly. The population of a ‘mega-city’ like Lagos swelled from 300 000 in 1950 to around 15 million in 2007 and is expected to reach more than 25 million by 2015[3].
Improvement in aspects of human development, such as levels of education and access to better health care, are contributing to a new urban culture. Literacy rates in particular are growing at a rapid pace; they are now at about 65 percent of the African population and projected to be almost 90 percent by 2050[4].
Life expectancy rates are improving, with the notable exception of South Africa as a result of inadequate hiv prevention for much of the last decade. Communicable diseases are being brought under control, to be replaced by a more ‘normal’ pattern of concern for chronic diseases and social problems. By 2050 it is expected that under- or malnutrition rates may be similar to incidences of obesity, proving the changing nature and normalisation of African society.
Africa’s economy and trade grow
If Africa is to shed its shackles of negativity, then the recently released McKinsey research report, Lions on the Move[5], is a wake-up call to potential investors still unsure about the future growth of the continent.
Africa’s economy is starting to show impressive growth – and in many cases, really rapid growth. Africa’s collective gross domestic product (gdp), at US$1.6 trillion in 2008, is now roughly equal to that of Russia or Brazil. Africa’s billion people spent $860 billion in 2008, more than India’s population of 1.2 billion. Considering that India has recently been considered one of the globe’s key consumer markets for the coming decade, the growth in purchasing power of the average African is nothing short of startling.
Importantly, this growth continued during the global economic crisis from 2007–2010; the continents of Africa and Asia were the only two regions of the globe to score positive growth. Africa’s ability to withstand the global battering sets a critically positive trend for the future.
Such resilience was largely the result of sound policies in place before and during the financial crisis, which enabled most countries to use fiscal and monetary policy to dampen adverse effects. It was also a function of the limited global exposure from Africa’s banks to the global market. Before, during and even after the crisis Africa has been characterised by steady growth, low inflation, sustainable fiscal balances and public debt, as well as rising foreign exchange reserves[6]. If Africa was able to navigate through such a storm with relative ease, especially when compared to the disasters of Ireland, Greece and Portugal, then together with projected future improvements in social conditions and prospects, the continent is exceptionally well placed to build on its resilience.
Africa’s growth acceleration is currently geographically dispersed across much of the continent although it must be analysed with caution because impressive growth rates often don’t translate into a meaningful improvement in the lives of ordinary citizens; elite monopolisation of resources often retains wealth in the hands of the politically well-connected few.
Notwithstanding this cautionary note, 27 of the 30 largest economies on the continent have expanded rapidly since 2000. All economic sectors contributed, including resources, finance, retail, agriculture, transportation and telecommunications. The direct causes of Africa’s growth surge were improved political and macroeconomic stability, and microeconomic reforms.
Africa has seen some of the fastest-growing economies in the world, but also some of the slowest, including several in decline. Angola, bolstered by oil fields, is the third-fastest-growing economy in the world. This contrasts with Zimbabwe, which is experiencing a precipitous decline, based on a lack of natural resources coupled with a disastrous series of economic policy choices and deteriorating democratic governance.
Clearly, commodity-strong economies resulted in some of the world’s highest advances in gdp. Three of the world’s ten fastest-growing economies are currently African[7], with some having been at times the fastest-growing in the world. Equatorial Guinea, for example, reached 75 percent growth in 2004 because of oil production. Angola, Ethiopia, Rwanda and Mozambique have regularly equalled or even exceeded a gdp of 10 percent, and these examples are likely to persist in future. The International Monetary Fund estimates that gdp in the 47 countries of sub-Saharan Africa rose 5 percent in 2010 – pretty impressive given the global recession[8].
Africa’s gdp will increase to approximately $2.6 trillion in 2015, a rise of almost a trillion dollars in only seven years. Economic growth will expand by an annual average real rate of 5.5 percent each year through the five-year period. The surge will be led by rapidly expanding economies like Ethiopia, Mozambique, Tanzania and Zambia but, importantly, will be underpinned by robust growth in large regional heavyweights like Egypt (assuming a peaceful democratic transition), Angola, Kenya and Nigeria. More meaningful economic recoveries in advanced economies in the later part of the forecast period will support economic advancements in commodity exporters. The next five years will manifest further financial market deepening, and currency and asset appreciation across Africa[9].
Africa’s total trade will maintain recent trend growth, expanding by an impressive average of 17 percent per year. A number of structural and policy-induced improvements will serve to maintain Africa’s improved position in world trade. Africa’s share of global trade is in line to almost double, from 3.2 percent currently to 6 percent in 2015, clearly reversing its historically marginalised position. It is important to recognise that Africa’s share of world trade bottomed at 1.7 percent in 2001, then doubled to 3.2 percent in 2009, and is now expected to double again between 2010 and 2015[10].
Oil in Africa has created ‘wealth spots’ where a few countries have exceeded their neighbours in affluence. As the potential for peak oil looms in the mature oil-exporting nations of the world, expect some similar growth spikes in countries like Ghana where new deposits have been found. African oil discoveries are likely to be a driving force for major growth as the industrialised world turns its attention to some of the planet’s last untapped reserves. In Ghana’s case, its more transparent democracy can ensure that enhanced commodity revenues (estimated initially at around $1 billion a year) place the country firmly on the global map, thereby raising its voice in international forums and on issues of global concern.
What these countries often lack in distributing their wealth to their citizens, they make up in developing a power dividend. They attract the attention of large corporates and countries alike. They become the focus of diplomatic initiatives from countries in need of shoring up their own supply of scarce natural resources. A democratic dividend won’t necessarily be the defining positive spin-off from impressive gdp results, but rather an enhanced global attractiveness (and assertiveness) for foreign investment and elite-based agreements – even if only partial lip service is paid to democratic accountability and transparency. Expect smaller commodity-rich African states to become global household names, their presidents courted from Beijing to Brasilia, even though riches and rising gdps are no immediate panacea for ending corrupt governance.
So