A decade ago The Economist labeled Africa “the hopeless continent”. Now in a recent issue the same magazine describe the continent’s impressive change and growth. A few quotes:
“Africa’s economies are consistently growing faster than those of almost any other region of the world. … Ethiopia will grow by 7.5% this year, without a drop of oil to export. Once a byword for famine, it is now the world’s tenth-largest producer of livestock. … Over the past decade six of the world’s ten fastest-growing countries were African. In eight of the past ten years, Africa has grown faster than East Asia, including Japan.”
Africa now has a fast-growing middle class; today around 60 million Africans are part of the middle class and by the year 2015 about 100 million will be. These numbers represents people lifted out of poverty.
The World Bank states: “Africa could be on the brink of an economic take-off, much like China was 30 years ago and India 20 years ago.”
We know that aid has not lifted Africa out of poverty, as the international economist Dambisa Moyo has clearly demonstrated in her book Dead Aid. But what are some of the drivers and factors behind this positive change? In short, it is trade not aid.
One driver is the application of technology, especially mobile phones. Africa has 600 million mobile phone users, more than Europe or America. A study from 2009 showed that adding an extra ten mobile phones per 100 people in a typical developing country boosts growth in GDP per person by 0.8 percentage points. These phones are, for example, used for banking and for business with crops and fish.
Other factors are increased investments and trade. In 2010 total foreign direct investment was more than $55 billion—five times what it was a decade earlier, and much more than Africa receives in aid. Trade barriers have been reduced, intra-African trade has increased and privatization has contributed to growth.
Another big non-commodity driver of the economic development is political stability. For many decades in the post-colonial era the cold war superpowers fought proxy wars on the African continent, and there were few democratic and peaceful changes of government. But in the past 20 years it has been different and governments have changed through the ballot box more than 30 times. (That is far more often than in the Arab world)
36 out of 46 African governments made things easier for business in the past year.
Africa still has many challenges and is far from becoming a new China or Singapore in the near future. But we can rejoice in the encouraging developments and also learn from them.
The Economist ends its lead editorial with a helpful reminder: “Autocracy, corruption and strife will not disappear overnight. But at a dark time for the world economy, Africa’s progress is a reminder of the transformative promise of growth.”
PS. This blog entry is also available in Korean, click here –> Africa: From the Hopeless Continent to Lion Economies
Mats, thank you for sharing this. It is very encouraging to take a look at the figures and be able to see change over time. I am especially glad to see a number of countries so much more politically stable today. I visited Africa in September 2011 and was able to see signs of what is described, but also still huge social economic issues, visible right on the streets with thousands of people just barely surviving. There factors not mentioned in the document, such as the influx of money sent by Africans living elsewhere, which has been a factor in the change seen in many Central-American countries, for example. Are there figures for that? Another factor I have heard and read is education. It would be quite interesting to see a country by country study and reflection, but for now I will just say it is very good to get this overall positive picture.