It is a fact that Africa has lately been on the radar screens of international media and news services, hogging many columns of commentary and being allocated prodigious airtime at conferences and on news channels. The world is warming up to Africa as Africa opens wide its arms to the world. And for good reason. In case you have not noticed (yet), an economic renaissance is underway on the continent. Over the ten years to 2010, no fewer than six of the world’s ten fastest-growing economies were in Sub-Saharan Africa, while the IMF (International Monetary Fund) forecasts Africa will grab seven of the top ten places over the next five years. This confirms Africa as the fastest growing region in the world. Africa is hot!
Yet, there appears to be a sense of disbelief and déjà vu surrounding this progress, especially in the developed West. There’s a feeling that we’ve been here before and the outcomes were less than enchanting. Well, this time it is different. It is different for various reasons, but chief among them is that those earlier instances, when critically analysed, were never in essence forces for continent-wide economic empowerment nor causes of widespread structural alignments. They just could not result in general and widely distributed prosperity across Africa.
The first such instance came in the wake of the independence period between 1960 and 1970, when the majority of African nations became independent from European colonisers. GDP growth rates were in the range 6% to 9% for many of the newly independent economies. A big portion of this growth was due to the fact that majority rule had just replaced minority rule, resulting in the inclusion of the previously excluded majority in the economy, both in public affairs and commercial engagement.
This was a one-off and incoming indigenous governments failed to enact progressive and sustainable policies to ensure the entrenchment of inclusivity and a culture of wealth creation. It wasn’t long before these same countries were in free-fall as the new political class hijacked the visions and aspirations of the masses and appropriated opportunities for themselves and their own. Tragically, they presided over the exploitation and inevitable depletion of what existed rather than fostering the imagination and creativity that brings about new wealth and possibilities.
The second instance came in the wave of infrastructure finance in the 1970s when the Paris Club and London Club of global private lenders swooped on Africa in search for new client economies and lending opportunities. Most of the legacy roads, ports, airports and government buildings in African capitals were realised through these programmes. Momentarily, growth seemed to naturally stir in the midst of this big-ticket spending.
But it would not stick. Not only were these loans structured lopsidedly in favour of the lenders with extortionate interest rates, the repayment terms also meant that the principal somehow always remained intact or actually kept increasing. To this date some African economies (which have not accessed debt forgiveness) are still grappling with the trauma of these loans. Above all, it was seemingly forgotten that infrastructure is a pipeline. What lacked was the water or liquid, in whatever other form, to flow through it. There was no effort, neither desire nor determination, to encourage commercial endeavour on the part of the indigenous people. The roads became cattle tracks and the sea ports remained gallery show pieces during national exhibition events when they were not clearing military hardware.
The third and fourth instances were similar, with similar effects. These were the global commodities booms of the 1980s and the 2000s. Prices for raw natural wealth from Africa tripled, even quadrupled in some cases, in long running phases of world economic expansion fuelled by heightened commodities consumption to construct or modernise both Eastern and Western economies. These left some African governments’ coffers overflowing with surpluses.
The pitfalls with this were legion. Mining in Africa is largely operated under systems of state capitalism in partnership with giant multinationals, to the exclusion of local private sectors. The mining sector also does not have much impact on job creation, being extensively mechanised and automated, and its products are sold in export markets abroad as raw materials without any impact on the local consumer markets.
Besides, and most importantly, the mining sector is not present in all African countries, not even in the majority of them. Where it has been present long term (except in very few glowing exceptions such as Botswana) it has tended to result in opaque governance systems that have seen the propagation of corruption. It has also provided less and less incentive for economic liberalisation and therefore the private sector has generally remained stifled and less empowered by mining.
Looking back, we can conclude that the four previous spikes of economic growth in the continent of Africa failed because of their unique patterns and characteristics as follows: top-no-down (governments only), zero-sum (expensive finance on non-commercialised infrastructure), isolated (resource-rich countries), and unstructured (no trickle-down mechanism).
On the other hand, what sets apart the current economic growth is that it is the most eloquent statement yet that Africa’s consumer markets have come of age. It is a bottom-up economic revolution. It is ubiquitous. It is inclusive. It is fundamentals-driven. It is long term.
My next article will further develop this argument.