Africa Takes Off
Sub-Saharan Africa is starting to shed its reputation as an economic laggard. The West should pay attention.
Pity sub-Saharan Africa -- but maybe for not much longer. In the first decade of the new millennium, six of the world's ten fastest-growing economies (Angola, Nigeria, Ethiopia, Chad, Mozambique, and Rwanda) were from this region. And in eight of the past ten years, it has grown faster than Asia.
Pity sub-Saharan Africa — but maybe for not much longer. In the first decade of the new millennium, six of the world’s ten fastest-growing economies (Angola, Nigeria, Ethiopia, Chad, Mozambique, and Rwanda) were from this region. And in eight of the past ten years, it has grown faster than Asia.
To be sure, some of the region’s growth stars owe their success in part to the global boom in commodity prices, most notably in oil. But Ethiopia managed to grow by 7.5 percent last year without producing a drop of petroleum. (Ethiopia’s brightest newest export: cut flowers.)
Note, too, that average incomes in sub-Saharan Africa are still very low; for example, the per capita income in Chad is below $1,800 measured in terms of purchasing power, less than a tenth that of Poland or the Czech Republic. It will thus take decades of growth to bring living standards to acceptable levels.
But according to the IMF, the region is on track to grow by six percent this year, about the same as Asia. And there are convincing reasons to believe that a healthy pace can be maintained for the foreseeable future. Indeed, in the World Bank’s view, Africa "could be on the brink of an economic take-off, much like China was 30 years ago, and India 20 years ago." That should be raising doubts about the appropriateness of international assistance policies based on the presumption that Africa still lacks the capacity to break out of its dispiriting cycle of poverty, dysfunctional governance and tribal violence. More on that later.
Ready to be surprised? Trade between Africa and the rest of the world tripled in the last decade. And by no coincidence, Africa has attracted more private foreign investment than official aid since 2005. Consider, too, that Africa’s share of global foreign direct investment — the most prized sort, since it brings along technology and management skills — rose from less than one percent in 2000 to 4.5 percent in 2010.
But perhaps the most visible evidence of widening prosperity is the incredibly rapid penetration of mobile communications. Take Ghana, which, by the World Bank’s reckoning, graduated to middle-income status last year. In the late 1990s, the country has a mere 50,000 working phone lines in a country of nearly 20 million. Now, three-quarters of the population has access to cell phones with both voice and instant-message capability.
In fact, the amount of money directed towards phone use has forced government bean counters to reconsider their (sometimes very rough) estimates of the region’s income. In Ghana’s case, the government recently revised upwards its estimate of private GDP by an astonishing two-thirds.
This telecom revolution is generating vast, unanticipated benefits. For example, farmers with phones now have access to timely market information, which makes it possible for them to bargain more effectively with middlemen. And "mobile money" — credits transferred securely from one phone to another by instant message — makes banking possible where bricks-and-mortar banks hardly have a presence.
No true "innovation cluster" yet exists in Africa. But the nexus of mobile telecom networks and financial services has spawned a collection of tech-oriented businesses in Nairobi, with Safaricom, Kenya’s largest mobile supplier, at its hub. (The image above shows Nairobi by night.) The not-fully-realized value of wireless technology is encouraging entrepreneurs to think big. Very big: the Indian telecom Bharti Airtel paid $10.7 billion in 2010 for the African mobile-phone networks of a Kuwaiti-based Zain Telecom.
Zambia, which also made the cut to lower-middle-income status last year, illustrates much of what’s good that’s happening to sub-Saharan Africa. The economy has been averaging five percent-plus growth over the past seven years. That’s due in part to the cyclical boom in copper prices, Zambia’s chief export. But Zambia’s agricultural sector is doing very well, too. The production of corn, a staple, leaped by 50 percent in 2010. The record harvest, by the way, illustrates the importance of good governance; Accra’s timely distribution of subsidized fertilizer to small farmers made a big difference in yields.
The Zambian experience has been matched in neighboring Malawi, long a country plagued by food shortages and famine. Several years ago, the government launched a program (against the advice of international aid agencies) to both subsidize fertilizer and to support corn prices through purchases. Malawian farmers are now growing enough corn to satisfy domestic demand and have some left for export to its poster neighbor of bad governance, Zimbabwe.
There are good reasons to believe that this agricultural boom will endure beyond the general commodities boom driven by Chinese and Indian demand. First, Africa possesses 60 percent of the world’s uncultivated arable land. So while the region is still a net importer of food, there’s no hard economic barrier to considerable expansion of production. Second, improved communications and transportation is making it practical to expand intra-regional food trade. Indeed, agricultural economist Steven Haggblade at the Michigan State University argues that the key to food security in Africa is increased investment rural infrastructure.
Another reason for optimism about the sustainability of growth is the reduced likelihood of war. Scott Straus of the University of Wisconsin estimates that "African civil wars in the late 2000s were about half as common compared to the mid-1990s." What’s more, "contemporary wars are typically small-scale… and involve factionalized insurgents who typically cannot hold significant territory or capture state capitals."
The reasons for the decline in organized violence are not altogether clear. But there seems little doubt that economic growth makes war less likely, and less war makes growth more likely.
The improved economic picture across sub-Saharan Africa has yet to translate into innovative approaches to the region by the international community. The U.S., Europe and Japan, the leading suppliers of technical assistance, grants and loans to Africa, still largely build policies on the premise that the region is mired in poverty and that the prevention of the worst forms of human degradation — death by untreated disease, starvation, lack of clean water and physical security — is a much higher priority than the more complex issues of building institutions that support macroeconomic stability, public infrastructure and efficient market incentives.
One reason is the persistent belief that African growth isn’t sustainable because it is largely dependent on steep rises in export prices for everything from cotton and cocoa to oil and copper. Certainly the boom has mattered. But as I discuss above, much points to the conclusion that growth is not transient this time around.
Population expansion also casts a cloud over Africa. So when computed on a per capita basis, GDP growth remain substantial — but not as substantial as one would like. Here, too, though, the big story is positive: Fertility rates are falling almost everywhere in Africa.
There are subtler forces at work here, though, which retard the evolution of thinking about aid. Many governmental and non-governmental aid organizations have traditional commitments to combating famine and other extreme forms of suffering are institutionally reluctant to shift focus.
Cynics would argue that the change would make fund-raising (both private and public) more difficult — the slow accretion of productive capacity just isn’t very media-genic. I suspect it is more closely tied to the need to shift from tried-and-true strategies of delivering charity to the far more difficult task of encouraging institution-building and managing the ambiguities of interest-group conflict.
This glass is three-quarters full. Sub-Saharan Africa really does seem to be following other regions in building solid economies on the rock of institutional stability, free markets and more open trade, especially between African countries. Yes, ordinary Africans would benefit if international donors to acknowledged the new realities — and there is a lot more that could be done by outsiders to accelerate positive changes.
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