Peter Guest

Africa’s growth spurt

Africa’s growth spurt
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When South African police opened fire on striking miners at Lonmin’s Marikana platinum mine, it had all of the hallmarks of the bad old days of the continent - the tangled and violent business of pulling metal from the ground in the “Dark Continent”.

The events at Marikana were symptomatic of the fractious politics of labour in South Africa, the uncomfortable alliances forged in the anti-apartheid struggle that have not resolved themselves in peacetime. However, at their root they have the simmering tension caused by the unequal distribution of economic opportunity that is not restricted to South Africa.

The mining sector there, and elsewhere in the developing world, is nearly always a lightning rod for criticism and unrest. Exposed to the vagaries of the international commodities markets, mining companies are huge revenue generators vulnerable to rapid changes of fortunes that see huge profits turn to huge layoffs of unskilled workers in short shrift.

A McKinsey report released in September said that the natural resources sector, a massive contributor to the economic growth figures of the continent, employs just one per cent of its workforce - a disproportionately small amount. There is little doubt that this imbalance, combined with the configuration of the economies that skews governments towards seeking rents from natural resource revenues, absent the democratic mechanism of income tax, has led to some of the worst corruption of the post-colonial era.

In this grim context, it is important to remember that African economies’ future will not be pulled from the earth, but will be driven by their demographics : the billion aspirational, creative and acquisitive individuals that make up a diverse and dynamic continent.

In 2011, sub-Saharan Africa's total population was estimated to be around 900 million people. Including the Maghreb puts the continent at more than 1 billion human beings. That population is growing at a greater rate than any other region, and is forecast to reach 2 billion by 2050, which has its concomitant risks and challenges but also creates massive opportunities as those populations are moved from rural subsistence to urban consumption, a shift which is happening at a startling pace. In 2010, the United Nations' Human Settlement Programme, UN Habitat, forecast that by 2030, more than half of all Africans will live in cities, from around 40 per cent in 2009. By the early 2040s, there will be more than 1 billion people living in the continent's cities. Between 2010 and 2020, the continent will add 122 million people to its workforce, according to McKinsey.

Behind this demographic boom has been an economic one. Between 2000 and 2010, six of the ten fastest growing economies in the world were in Africa. Between 2011 and 2015, the IMF forecasts seven of the top ten will be African.

In fact, Sub-Saharan Africa has grown consistently since the early 1990s, albeit with a great deal of variation between countries, some of which, including a huge swathe across Central Africa, were still locked in internal conflict.

By 2000, nine countries were still officially in recession, but much of the rest of the continent was beginning to emerge. By 2004, only Niger and Zimbabwe remained stagnant, the latter of which continued to suffer from years of economic mismanagement.

From 1999, until the oil price collapse in 2009, Angola's economy grew. More remarkably, in six of those years, it grew by more than 10 per cent, as the post-civil war government found new international relationships and created its own highly successful national oil company, Sonangol.

Nigeria, the continent's most populous country and, behind South Africa, sub-Saharan Africa's second biggest economy, has grown consistently since 1996. In most years since the turn of the Millennium, it grew more than five per cent. For three of those years, it grew more than 10 per cent.

Nigeria and Angola, obviously, are hydrocarbon-driven economies. But others performed equally strongly. Ethiopia’s economy grew by more than 10 percent annually from 2004 to 2009. Ghana, perhaps the most stable democracy south of the Sahara, as evidenced by the near painless transition after its president John Atta Mills died in office, has been growing since the early ‘80s. The country struck oil in 2007 and began production in 2010. Weeks before the first oil, Ghana rebased its economic data and leapt into middle income status.

The East African bloc of Tanzania, Kenya and Uganda also moved forward together at pace, until Kenya's 2007 election saw a convulsion of violence that slowed investment.

With only a few exceptions, the region also demonstrated uninterrupted growth despite the financial turmoil in the West. In 2009, while the aggregate of the industrialised countries GDP contracted by 3.7 per cent, sub-Saharan Africa grew by 2.8 per cent. While commodity demand from both the developed world and emerging markets, particularly China, had driven the resurgence, a combination of population growth, domestic consumption and vastly improved macroeconomic management made it durable.

These are not simply academic considerations. From Coca Cola to Guinness, Unilever to Nestlé, Barclays to Vodafone to IBM, global brands and businesses are putting their money and expertise into sub-Saharan Africa, and making good money.

African entrepreneurs are finding in the continent’s challenges and deficiencies huge opportunities to provide services and products that have a vast potential client base. Tablet computers are coming out of Nigeria, mobile money out of Kenya. Aliko Dangote, the continent’s richest man, is preparing to list his $11 billion cement business on the London Stock Exchange: a business built on supplying the construction materials for Africa’s economic boom. ‘Africa Rising’ has become a cliché too often repeated, but while mining shares might bounce, the continent’s stock is driving upwards regardless.

Peter Guest is the former editor of This is Africa magazine, and is author of Africa’s Century: Making Money on the New Frontier published by Endeavour Press.