BUSINESS REFLECTION
After the Bell: Africa rising? Not so much
African per capita economic growth has had an enormously hard time keeping up with population growth, which has been exponential.
It’s common cause that SA is in economic trouble — we feel it all around us. What is less well known is that SA’s problems, not accidentally, are reflected in the economy of the African continent. It too is in deep trouble.
This is a new, unsettling and surprising development. In 2011, the descriptor Africa Rising was coined by the Economist magazine and picked up by several other publications. Books were written about the subject including — surprise! — Africa Rising, by Vijay Mahajan.
The idea behind the notion was that democratisation was increasing, notably in Nigeria and South Africa; there was comparative peace on the continent; the internet and mobile phones were helping to facilitate big jumps in education and business; and there was huge growth in entrepreneurship.
One of the most important aspects was a leap in consumer spending, and countries around the world started to notice just how large Africa’s population was becoming. This was all visible in the economic numbers. Between 2005 and 2015, the economy of Africa as a whole increased by 50% compared to the world average of 23%.
But as often happens, almost as immediately as the “trend” was declared, it stopped. The headline number, sub-Saharan Africa GDP per capita, peaked in 2014 at $1,936 and has since fallen by more than 10% to about $1,700 this year. In the same period, global GDP per capita has risen by nearly 15%.
Bloomberg columnist Javier Blas has done a good job here of explaining some of the reasons for the decline. The main cause is that the rocket fuel that was pulling Africa up — global commodity prices — flattened after the financial crisis in 2009.
But this is not the full story. Commodity prices were also flat during the 1985 to 2002 period, when there was a period of stagnation in African growth. However, there are noteworthy differences.
What happened after the commodity increase in the 2000s is that the global bond market opened for African countries, and working on the basis that the growth trend was strongly ascending, a whole bunch of countries jumped in. As African countries found their feet economically, aid injections, particularly those from Europe, started to decline. And the rise of China helped keep investment rates pretty high.
At the same time, markets opened up and importantly, other than in some dire cases like Zimbabwe, inflation was kept broadly under control. Blas quotes some extraordinary statistics on these issues, including the fact that sub-Saharan African nations haven’t raised any money in the international bond market so far this year, breaking with years of heavy issuance.
The European aid budget has declined markedly, and with African governments under severe strain, Chinese debt-funded investment has also dried up. US interest in Africa has never been sizeable; former US president Donald Trump famously described African countries as “shitholes” and never visited the continent; neither has current President Joe Biden, apart from a brief stopover in Egypt.
African per capita economic growth has had an enormously hard time keeping up with population growth, which has been exponential. The big improvements in African healthcare have been a wonderful boon for natal survival rates, but they also have the effect of making it hard for African governments to generate the economic growth necessary to improve overall poverty rates.
The result has been that two African countries have already defaulted on their debt, and the governments of the entire northern swathe of the continent and other countries elsewhere on the continent have fallen to military coups.
What’s remarkable about this turn of events is that globally, I get the impression the level of concern in what might be described as “the West” and even in “the Global South” has been incredibly low.
This is all worrying, but to me, the situation is by no means lost. Africa is generally a different place now. In broad terms, African growth in real terms has matched global growth over the past decade. Many of the financial and business reforms made during the 2000s will stick in most places. East Africa, for example, is just powering ahead.
I know these things are kinda arbitrary, but Africa’s population is now twice that of both Europe and South America. Ultimately, demographics are destiny and Africa’s time will come. It’s just going to take a bit longer than the conventional wisdom circa 2011. DM
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A bit of an armchair analysis, both by Tim and the Bloomberg analyst. Sure, just looking at the top level numbers suggests that GDP per capita – a notoriously fickle measure of progress – may be struggling to keep pace with population growth, but it bluntly ignores that much of Africa’s economy is informal and almost inevitably under-calculated in GDP numbers. The lazy headlines we see, year in and year out, about ‘sub-Saharan growth declining’ inevitably fail to account for that sluggish growth being largely attributed to declines in three key economies – South Africa, Nigeria and Angola. Remove these three from the picture and growth numbers are far more positive.
I think though, that if you actually travel to other countries in sub-Saharan Africa (excluding the Med Basin 5), you’ll see a very different picture on the ground: shifts away from simple primary economies based on primary agriculture and extractives, to more local processing (certainly along the agri-industrial value chain), as well as into areas such as building materials (cement, downstream steel, pipe and tube, paints, fittings and fixtures and the like), downstream food and beverage, which brings with it an increase in local production of packaging, logistics and storage capacity and the engineering behind this. Services – from local engineering and machining capacity in extractives, to ICT, telecoms, tourism and others have also added depth and breadth to many economies in the last 20 years.
I am not denying that there has been a sharp slide in democratic accountability (notably the Sahel, parts of the Horn and here in SA), but that’s a global trend – Russia, China, most of the Middle East, India, right-wing populism in Eastern Europe and Scandinavia (and the USA), parts of Central America: but to dismiss the progress and change that I’ve seen in the last 25-odd years across Africa in the roughly 30 countries I’ve worked in, based on a couple of cherry-picked numbers that don’t look beyond the headlines (Tim does give a nod to East Africa, but ignores some of the +6-7% growth numbers coming out of West Africa as well), is shallow.
It’s also, unfortunately, very South African. From politicians (Zuma’s famous ‘this is not Malawi’) to business leaders at every level of decision-making I come across, to the press and society in general, there is an erroneous assumption that if things are tanking here, that the rest of the continent is even worse, when in fact, in many countries the changes are positive: Angola, Zambia and Tanzania all have new leadership that is absolutely in step with the need for economic reform – and it’s showing in new investment levels; the Kenyans operate quietly to build and develop a services and manufacturing economy (as does Rwanda), and Nigeria will be Africa’s first US$1 trillion economy. Africa is rising, but is also part of a global economy that is is flux and has been for some time.