Will the 21st Century Be African? Part 5 – Economy

Will the 21st Century Be African? Part 5 – Economy

In previous blogs, we have looked at how African Society might change in the 21st century, at how technology will affect Africa, and the big environmental issues Africa faces.  In this blog we look at how Africa’s economy might change as we move towards the end of the first quarter of the 21st century.
Remember, Africa is a continent of some 54 countries.  In these blogs we are focusing on sub-Saharan Africa – 46 countries according to the UN World Development Programme.  The African Development Bank’s overview of prospects for growth in the near term, sees African growth reaching 4.1% in 2020.  That would be stellar growth in the developed world, but it’s not enough in Africa to address fiscal and current account deficits and unsustainable debts, along with population pressures, and it is held back by sluggish growth in Africa’s three biggest economies, South Africa, Nigeria and Angola. The Bank argues that Africa needs to loosen the constraints on free trade in order to maximise its growth and prosperity.  The good news is that it is in the process of doing so.

Moves to open up trade are in hand.  The African Union reports that the African Continental Free Trade Area (AfCFTA) is now moving from its ratification phase to becoming operational.  Although the pace of change may be unpredictable and variable across the continent, AfCFTA will provide greater opportunities for growth and development for those who are ready to grasp them.

A look at current trends within countries gives us an inkling of which countries these might be. Looking beyond average GDP to individual states, we see some clear leaders.  According to the World Bank’s reports, Ethiopia, which had growth of 8.2% in 2018, is forecast to grow at 7.8% in the next two years.  Also forecast to grow 7%+ are Cote d’Ivoire and Senegal, whilst Benin, Burkina Faso, Rwanda, Sierra Leone and Tanzania are all forecast to grow at 6%+.

Looking further into the future, Africa’s population growth – projected to rise from 1.2 billion today to 2.5 billion by 2050 – will clearly lead to significant economic growth. But does it mean that Africa will become more prosperous?  The signals are mixed.  Africa will have a young population, likely to be ambitious, acquisitive and innovative. It has a strong and growing services sector, boosted by IT and connectivity.  More people in Africa use their phones for financial transactions than anywhere else in the world, according to McKinsey.

As noted above, moves have begun to increase the ease with which African states can trade with each other. And according to several studies, at least parts of Africa are becoming easier places to do business, and stronger on innovation, competitiveness and good governance – we will come back to the question of governance in the next blog.  Countries to watch include:

  • Botswana
  • Ethiopia
  • Kenya
  • Madagascar
  • Mauritius
  • Mozambique
  • Namibia
  • Rwanda
  • Senegal
  • South Africa
  • Tanzania
  • Uganda

On the other hand, the infrastructure is generally poor.  China’s Belt & Road Initiative promises to allow Africa to take much-needed steps forward in this area.  Africa has to improve its road and rail, and its power generation and supply systems. Some African and international commentators see the potential debt implications of Belt & Road as a major concern.  Others feel that the benefits, in terms of infrastructure and unleashing the continent’s economic potential, are too good to miss.  According to an IMF podcast, countries in Africa that have invested in infrastructure are the ones that are seeing growth rates of 6% or more.

Africa is rich in natural resources.  Of course some of these resources include coal and oil.  As the world moves away from burning fossil fuels, as it combats global warming, will Africa manage to write off such “stranded assets”, or will some countries seek to cash in on their oil and coal while they still can? Will Africa’s power infrastructure be based more on renewables, or on locally available coal and oil?

Africa’s potential as a tourist destination is still largely unrealised. Its size, the difference in and majesty of its lands, the diversity of its cultures and its still abundant animal life all point to the opportunity. But its power and transport infrastructures, coupled with the potential for unrest, make large parts still attractive only to ‘adventure tourism’. Mass market travel and tourism depends on fixing the internal issues whilst also developing its attractiveness as a destination – which in turn relies on the headlines in the world press turning from a focus on the problems to the opportunities.

There is also something to be said for the need in Africa for the rest of the world to stop seeing it as ‘Africa’, but as 46 countries with as wide a range of development, political stability and opportunity as the rest of the world. In Europe in particular, the tendency to view Africa in an almost imperial sense, of it being a clump of poor countries with immense social and developmental problems, has failed to catch up with the reality – and it is when African countries themselves can break that imperial view and start establishing their own distinct presence that they will truly begin to take their place in the world’s political and trading structure. We see encouraging signs of this, both within the individual countries and through the establishment of continental and subcontinental trading and political agreements.

A Virtuous Circle?

So there are mixed signals for Africa: on the one hand, a recent history of strong growth, a group of pathfinder countries that are setting the pace on growth and governance, natural resource wealth, and a population boom, that will see Africa become the youngest continent on the planet; on the other hand, historic problems such as poor infrastructure, debt and poor governance – and in some countries, the reality of ongoing conflicts.

It is not possible to predict precisely how things will go, but given the heterogeneity of the continent it is probably safe to say that the picture will be uneven.  An optimistic scenario would see a number of positive developments:

  • The trail being blazed by the best of Africa’s developing countries, which will begin to create a model for others to copy and learn from, in which case Africa’s growth will match that of China and India
  • The much-needed infrastructure investment from China – and perhaps enhanced by investment from other would-be trade partners – will provide the underpinning that allows Africa to maximise its development opportunities
  • Resourcefulness and innovation using new technologies, devolved and sustainable power generation and supply – as discussed in the Technology Blog – will see Africa find ways around the constraints of over-regulation and poor governance in doing business
  • A growing mood of self-confidence among Africa’s most successful leaders – moving from a sense of dependence on the rest of the world to a relationship of equals – leads to changes in the way African nations trade with each other, and with the rest of the world: we will have more to say about this in the next blog….
  • ….matched by the aspirations of a rising and better-educated population.

Watch This Space

In the next blog in this series we look at Africa’s governance, looking at the aspirations of Africa’s people, the evolution of governance across the continent, and the growth of a more self-confident and outward-facing Africa in the world.

Written by David Lye, SAMI Fellow and Director and Jonathan Blanchard Smith, SAMI Fellow and Director

The views expressed are those of the author and not necessarily of SAMI Consulting.

SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.

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