Maravi

(HERALD) ‘Africa’s economic potential is limitless’

‘Africa’s economic potential is limitless’
Thursday, 12 January 2012 00:00
Dr Chinua Akukwe

Africa, the cradle of human civilisation, appears set once again to become a principal bastion of economic prosperity. This may seem far-fetched for a continent that although accounting for 11percent of the global population, it generates only 2 percent of current global economic output and less than 1 percent of global trade.

That Africa with 24 percent of the global burden of disease but only 3 percent of the global health workforce will play a central role in the global economy is bound to raise eyebrows.

However, the potential of Africa is almost limitless in the foreseeable future for multiple reasons. According to recent reports by the African Development Bank, the African Union, the World Bank, the International Monetary Fund, various articles in the African Executive, the Economist magazine, the Forbes magazine, the London Financial Times, the London Guardian newspaper, the McKinsey Global Institute, the Washington, DC Centre for Global Development, the HSBC bank and other publications, the future of Africa is not only incredible but potentially limitless.

I briefly review multiple reasons for the growing optimism about the future of Africa.

Africa's economy is projected to grow at reasonably robust levels during the next five decades.

A steady growth in both GDP and GDP per capita is likely in Africa. Africa's GDP will likely grow from US$1,7 trillion in 2010 to US$15 trillion in 2060. GDP per capita will increase from US$1 667 in 2010 to US$5 600 in 2060. The shorter term scenario also looks promising: Africa's GDP in 2020 will likely grow to US$2,6 trillion.

Most of the economic growth will be due to long-term gains from ongoing political and economic reforms, strong returns from commodities market in a continent that accounts for 30 percent of all global minerals, rise in foreign direct investments, the increase of megacities and the more one billion Africans of working age by 2040.

The middle class in Africa is growing at a fast pace.

Africa's middle class, defined as individuals capable of discretionary spending of US$2,20 per day, tripled in the last 30 years to 313 million individuals. The middle class now constitute 34 percent of the continent's population, the highest ever recorded rate.

By 2060, the middle class may represent 42 percent of the continent's population, more than one billion individuals. Africans earning up to US$3 000 a year in Africa will likely reach 100 million by 2015.

The impact of the growing middle class is evident in Africa, from magnificent private housing estates to multiple posh cars packed in single family residences, to the enrolment of children in expensive private schools and to the increasing rates of "middle class" non-communicable diseases such as diabetes and hypertension. Perhaps, a lasting economic impact of the rising middle class is the explosive growth in consumer spending that has made Africa a major destination of the global retail industry. Africa consumer spending may reach US$1,4 trillion by 2020, a projected growth of more than 50 percent from present levels.

South-South trade and economic co-operation will become dominant in the next coming decades.

In the last decade, Africa's export to BRIC countries (Brazil, Russia, India and China) increased by a scale of four to about US$114 billion.

Between 2005 and 2010, middle-income South countries generated at least 10 percent of foreign direct investments in Africa. In addition, South Africa, the largest economy in Africa, is now an established member of the BRIC.

The proportion of South-South trade by 2050 will account for more than 70 percent of all global trade by China; more than 80 percent by India and Brazil, respectively and; at least 60 percent by Russia. South-South development assistance partnerships will also increase in the next coming decades as demonstrated by the current growing profile of China, Brazil, India and South Korea.

Democracy continues to make steady progress. Dictatorships and autocratic governments are on their last legs in Africa.

In 2011, Africa recorded 28 multi-party elections in 17 countries. Despite well-known problems with electoral politics in many parts of Africa, it is safe to assume that the continent has swung significantly away from anti-democratic patterns evident in the 1970s and 1980s that favoured one-party rule, big man presidency and farcical national elections. An opposition party is now more likely to win elections and peacefully assume power in Africa than at any time in the last 50 years.

Africa may become the biggest beneficiary of rapid advances in technology.
Rapid uptake of advances in technology may ultimately become the most indispensable factor in Africa's renaissance in the 21st century.

The increasingly literate and educated Africa's youthful population is adopting social media and telecommunication technologies as the favoured method of communication.

The use of cellphones in Africa will rise from less than 10 percent current levels to almost 99 percent by 2060. Advances in biotechnology can dramatically jumpstart Africa's immense potential in agricultural

production through better yields with the use of fewer quantities of water and energy.

Advances in nanotechnology can significantly reduce health burdens through smarter, less expensive, streamlined discovery, production and delivery of medicine and other public health goods. Refinements in information technology can rapidly improve output in the extractive industry sector, leading to more cost-effective and environmentally friendly exploration of oil, gas and solid minerals.

Innovations in technology-based management and logistics systems can assist in faster industrialisation of the continent, creating better paying jobs, increasing the rolls of the middle class and creating opportunities for greater African ownership of manufacturing processes and distribution channels.

In particular, the tourism industry, an area of unparalleled growth potential in the coming decades, will benefit maximally from technology-based management and logistics innovations and efficiencies.

The role of Africans in the Diaspora will be significant.

Africa-Africa Diaspora partnership will be a dominant force in the coming decades.
New generation of Africans in the Diaspora will expand the frontiers of partnership with Africa far beyond the critical roles played by their parents and grandparents in the independence movements of various African countries over 50 years ago and in the fight against apartheid in South Africa and colonisation struggle in southern Africa more than 30 years ago.

The next phase of this relationship will focus on economic, technical and policy advocacy partnerships.

Although Africa and its Diaspora are yet to finalise and streamline modalities of the partnership, the future looks very bright as Diaspora communities around the world seek closer ties with native lands and continents.

It is very likely that a well funded public/private Africa Diaspora investment fund or facility will become operational in the next few years to mobilise and facilitate the participation of Africa Diaspora entrepreneurs and professionals in Africa's development.

Africa has now made a stand on aid effectiveness. Africa is home to a dizzying array of bilateral and multilateral aid initiatives, corporate social responsibility programs and foundation supported projects.

Very little co-ordination and harmonisation occur at country and host community levels.

In 2011, at the aid conference in Busan, South Korea, Africa delivered its first consensus position on international aid effectiveness focused on: (a) aligning donor commitments to continental priorities and national policies; (b) requesting African countries to go "beyond aid" by maximising domestic economic output and growth and; (c) redefining the donor and host country dialogue on aid to focus on equity, inclusiveness,

gender equality and effective results on the ground.

The Africa consensus is important since international aid is likely decline in the coming decades as more middle income countries emerge in Africa and donor countries support, decline.

Long-Term Significant Threats Remain

Significant threats to Africa's potential remain.

The most fundamental threat is the chronic level of poverty in the continent. The rosiest scenario indicates that at least one-third of Africans will still be living in poverty by 2060. Africa is the only continent in the last three decades that had seen more households become poor.

Famine, man-made or due to natural disasters, still stalks the continent.

Conflicts rage in some parts of the continent with debilitating health and human development consequences.

Lack of infrastructure remains widespread and the annual price tag of US$80 billion a year to meet existing need is prohibitive.

It is still tough to travel by road, air and water in most parts of Africa. It is even tougher in most parts of the continent to drink clean water, have access to basic sanitation or enjoy regular electricity.

Ethnic and tribal sentiments still dominate politics and nation building efforts. Command and control economic policy remain dominant in many parts of the continent. The private sector base is still small and private venture capital support, negligible.
Regional and sub-regional integration efforts are still lagging. Population-based voting remains tenuous in the continent.

The youth and elite of many African countries appear to have little in common.
However, tremendous upsides exist for a major transformation of Africa in the coming decades.

Six of the 10 fastest growing economies in the world in the last decade were in Africa.

More African countries can join that list. It is now the responsibility of Africans to continue taking specific steps towards realising the continent's limitless potentials. - African Executive.

* Chinua Akukwe is the former Chair of the Technical Advisory Board of the Africa Centre for Health and Human Security at the George Washington University, Washington, DC. He has written extensively on health and development issues.

Labels: ECONOMY, GDP

posted by MrK @ 10:01 AM