Africa is likely to keep growing, even if the current commodity boom slumps, argues the Economist in a recent cover story. That seems plausible, but of even greater importance is how African governments ride this momentum to transform their economies, says ACET’s chief economist.
The narrative about Africa is changing fast.
On December 3rd, the Economist, which ten years ago labeled Africa “the hopeless continent” carried a cover story, “Africa Rising”, in which it now acclaims Africa as “the hopeful continent”, and concedes that its rather depressing views about the continent a decade ago were “regrettable”.
It’s a major shift in perception; and officially places the Economist on a growing list of influential institutions and analysts that continue to bet big on an emerging Africa, McKinsey’s tone-setting Lions on the Move in 2010 being a noted example. This year the World Bank said that “Africa could be on the brink of an economic takeoff, much like China 30 years ago and India 20 years ago”. It is a remarkable upswell of optimism about Africa that seems well-deserved: not only did the continent produce six of the ten fastest growing economies in the world in the last decade; with its average GDP growth of almost 6%, the continent also grew faster than East Asia for eight of those ten years. According to the IMF, Africa is the fastest growing region of the world in 2011, a performance which it says could be sustained in 2012 and beyond.
Compare that to the current gloom in Europe and America’s sluggish recovery, and Africa clearly inspires: “At a dark time for the world economy” writes the magazine, “Africa’s progress is a reminder of the transformative promise of growth”.
Looking ahead the Economist is confident that “the continent’s impressive growth looks likely to continue”. However given that much of this progress has been driven by a boom in demand for the continent’s leading commodity exports – such as oil, gold, copper, and diamonds – “the big question”, it wonders, “is whether Africa can keep that up if [this] demand for commodities drops”.
It’s the big question on the minds of most Africa analysts. But as the Economist points out, Africa might be better placed now than in the past, to weather a slump in the markets for its commodities. First, the share of commodities in the recent growth is not as dominant as is commonly believed – “only about a third of the recent growth is due to commodities”. Second many governments seem to be investing more wisely now than in past windfalls from the commodities booms, and that could boost productivity in other sectors. Third, diversification has begun in several countries, however slow, – and the expected rise of services and light manufacturing will make economies more robust.
Africa, of course, still has huge challenges. Its share of total global economic output is still a tiny 2.5% and levels of poverty are the highest in the world. “Yet against the depressing familiar backdrop” argues the Economist, the fact that many “fundamental numbers are moving in the right direction” gives a lot to be hopeful about.
That, agrees Dr. Yaw Ansu, who is chief economist at the Accra-based African Center for Economic Transformation, is the more essential point. But even more important, Africa’s recent rise, he points out, must lead to structural transformation of its economies. “What Africa needs to do now”, he argues “is to ride this momentum and diversify more aggressively into manufacturing, agro-processing and knowledge intensive services”. Dr. Ansu believes that while it is heartwarming to see the past narrative of Africa improve, “it is the narrative of tomorrow which we must now author today”. At the heart of that future narrative ought to be “the vision of a transformed, post-commodities-dependent Africa; and it is possible”, he added.
Click here to read the Economist article.