AFRICANGLOBE – When world and regional leaders gather in Cape Town for the World Economic Forum this week, they will no doubt hear about the enticing potential of Africa: the companies, the projects, the plans.
And there is much to be excited about.
One could make a case that Africa will not only meet economists’ forecasts for the coming years, it could exceed those expectations.
All but a handful of nations in the global economy are now beginning to reap the benefits of an unprecedented confluence of major innovations.
The rapid spread of the internet from the obscurity of American academia into an enabler of global commerce has raised productivity at a phenomenal pace and resulted in colossal transfers of knowledge.
Cellular technology fused with both the Internet and consumer banking to revolutionize payment systems and the delivery of financial services, and extend microfinance to hundreds of millions previously cut off from formal banking channels. The costs of renewable energy–materials, production and installation, particularly in solar energy–have plummeted making rapid deployments of clean energy available to nations wishing to have more control over their energy supply.
Hardly a day passes without an announcement of a new invention that could be transformative as Africa addresses its enormous infrastructure needs: battery storage technology, efficiency advances in microturbines, or new types of building materials or techniques that reduce carbon emissions. Taken together, all these advances mean that Africa’s youth may have more “leap ahead” infrastructure and technology at their fingertips than their peers in other regions.
No less important are the real but less visible forces of change in Africa’s economy. Without much in the way of fanfare, Africa has been leading the world with its pace of investment climate reforms: the laws, regulations and permitting processes that had always been make-or-break factors for investors, but had been too often ignored by governments.
Africa was home to five of the 10 top improvers in last year’s Doing Business Report by the World Bank.
Private equity investors, meanwhile, are now quietly talking about one of the telltale signs of accelerating change. Rather than leaving Africa to seek opportunities elsewhere, talented young African men and women educated abroad are returning home to start their own companies or join the senior management ranks of African firms. So in just the past few years, Africa has begun reversing brain drain and instead is attracting younger people back to enrich its economies and markets.
The question for many African nations is not whether they will have economic growth but whether their now-famous growth will truly improve the lives of ordinary citizens.
With seven of the fastest growing economies in the world, Africa is home to six of the top 10 nations with the worst inequality. Even if one leaves aside the issue of whether such disparities are ethically or morally tolerable, or even politically sustainable, one must confront a stubborn fact. Highly unequal economies, over the long run, have had slower and less durable growth. The issue of inequality can be avoided; the evidence about its impact cannot.
The wealth generated by Africa’s abundant natural resources presents a tremendous opportunity to address this. The recent progress in establishing sovereign wealth funds in Ghana, Nigeria and Angola is encouraging. Careful management of these types of endowments with an eye toward inclusion and the long run should be the norm not the exception.
Last, there is the issue of corruption, the scourge that everyone believes someone else should be fixing. Together, Africans and African investors, political leaders and companies, need to tackle corruption that although only a minority commits, still impedes growth and opportunity for all. In modern history, it is very hard to find examples of nations much less regions, eradicating corruption altogether, particularly in very short periods of time. However, corruption will continue to pose a drag on economic growth if left unchecked.
By: Elizabeth Littlefield