18 June 2013

Africa: The Promise of Africa, Real or Mere Optimism?


Is Africa rising? Judging by the buzz and optimism of the young business leaders and political trailblazers from across the continent who gathered for the World Economic Forum on Africa earlier this month, the answer is a qualified "yes."

The African Leadership Network is emblematic of a new generation of leaders who brim with sophisticated confidence about Africa's emergence. They are part of the coming elite whose ideas shaped the discussion in Cape Town.

Echoing last June's UN-sponsored Rio Plus 20 summit on sustainable development, many young leaders want to replace the 2015 Millennium Development Goals, defined in the global North, with Sustainable Development Goals defined in the global South. Their call is to follow an era of loans and aid with one of investment and trade by "Unlocking Africa's Talent" - the theme for the Cape Town meeting.

Optimism about Africa's prospects is not new. Fifteen years ago, then South African Deputy President Thabo Mbeki heralded a coming African renaissance. He turned out to be prescient. Helped by a sustained boom in world commodity prices and insulated from the worst of the global financial crisis by low levels of debt, many African economies are thriving. Last month Africa Monitor singled out South Africa, Nigeria, Angola, Ghana and Ethiopia as high-growth economies to watch. Of the world's fastest growing economies, five of the top 12 and 11 of the top 20 are now in Africa.

Rwanda, best known for the genocidal murder of a million people less than two decades ago, is flourishing with a 7.8 per cent projected GDP growth rate for 2013 and an announced goal of eliminating dependence on foreign aid.

Recent discoveries of vast quantities of natural gas in Mozambique promise to grow that country's GDP by a factor of 10 in the coming decade. Hedge funds have been investing even in Zimbabwe considered by investment director David Stevenson as "the next emerging market dynamo."

How much of this Africa enthusiasm is hype. Global GDP, trade or investment figures do not show the continent having that much impact yet, and 18 of the world's 20 poorest countries are still in Africa, the others being Afghanistan and Haiti.

The African situation might be even worse than the statistics suggest as there is no reliable data on poverty for many of Africa's poor countries. This is to say nothing of the effects of civil strife roiling North and West Africa.

There was much talk at the WEF of reducing poverty-and-inequality. China has pulled millions out of poverty over the past few decades, but inequality there has increased dramatically. South Africa has also made inroads into its high poverty rates but its Gini coefficient--a standard measure of inequality--remains unchanged. The only exception to this rule is Brazil where poverty and inequality were reduced together. There are also demographic worries. The median age on the continent is 20. These people must be educated and employed. Currently 61 million school-aged children in Africa are not being educated. The demands on educational infrastructures and the dearth of qualified teachers is overwhelming.

Unless economic resurgence steers Africa's economies in more diversified directions, the dangers of cronyism and misgovernment long associated with the oil curse will remain. Winner-take-all economics begets loser-lose-all politics. Mozambique's natural gas bounty could do for it what North Sea oil did for Britain and Norway, but there are also the Libyan, Venezuelan and Russian possibilities. Ditto for Nigerian oil.

Economic diversification is easier said than done. WEF co-chair and philanthropist Mo Ibrahim noted that there are now 650 million cellphones in Africa. This reality makes instant communication, retail banking, and other forms of commerce possible overnight. But Ibrahim also pointed out that not one of those cellphones is manufactured anywhere in Africa.

By itself this is not such a devastating fact. Economists tell us that everything need not be built everywhere; people must play to their comparative advantages. The failure to grasp that led to plenty of wasted effort on import-substitution industrialisation in Latin America in the 1970s and 1980s. But Africa's emerging-market economies are in desperate need of diversification and employment in an era of deskilling. The Chinese do not have any particular skill or resource endowment for manufacturing cellphones. Africans should be competing with the Chinese rather than just selling them raw materials, the extraction of which often does not even create local employment when Chinese companies bring in their own nationals to do the work.

Africa faces daunting challenges, but no one should write off the entrepreneurial dynamism pulsing through the conference. In South Africa, as elsewhere on the continent, the gap between what has been done and what now awaits will partly be filled by the new generation of African leaders who shaped the conversation at the WEF. They represent hope for a better African future.

Ian Shapiro is Sterling Professor of Political Science at Yale University, where he also serves as Henry R. Luce Director of the MacMillan Center for International and Area Studies.

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