With an ailing US economy, European debt battles and Japan rebuilding after a crisis, investors should be looking south — to Africa, the head of the African Development Bank said.
Investing in the continent at a time when developed countries’ economies are struggling would boost the world economy, Donald Kaberuka said this week in an interview in Washington.
Africa is rich in mineral wealth and proven oil reserves, has a growing, urban middle class and undeveloped infrastructure.
And its leaders are working to improve security, stability and rule of law. They have also learned from the uprisings in North Africa and the Middle East that economic advances have to benefit a country’s people, not just its president and his inner circle, in order to be sustainable.
“Opportunities elsewhere are not many. So Africa is the opportunity,” Kaberuka said.
“Some of our bonds are better than, Asian and European bonds.”
Economies in sub-Saharan Africa are projected to grow at 5.6 percent this year and 6.5 percent next year, with a dozen countries growing at the critical rate of seven percent, considered the minimum for sustainable poverty reduction.
“Growth now is happening in emerging markets,” Kaberuka said.
“Imagine if there were no China and India or Brazil at a time when Europe and the US are in difficulty. It would be a big recession because China and India and Brazil are picking up the slack.
“Adding Africa, I think is going to give a boost to the world economy,” he continued.
Besides Africa’s oil and mineral wealth, which foreign investors have long had a hand in exploiting, Africa offers other business opportunities up for grabs.
“Forty percent of Africans live in urban areas. That means they want housing, infrastructure. They’ll be using consumer products and appliances,” said Kaberuka.
“You have the choice of making it in Africa or importing it. Either way creates business.”
The bank chief also advocated setting up free trade agreements with Africa.
Just last month, British Prime Minister David Cameron said that an African free trade zone could increase gross domestic product across the continent by $60 billion a year — $20 million more than the world now gives Africa in aid.
“Rich countries would not have to give us aid; trade would create wealth,” Kaberuka said.
African leaders agreed in South Africa in June to launch negotiations on creating a free trade zone that would include 26 countries with a combined economy estimated at $875 billion.
For their part, African leaders are working to improve stability and security and ensure that the continent’s wealth benefits its people.
Kaberuka said the popular uprisings now roiling Arab countries highlighted the importance of “inclusive, shared” economic growth rather than national wealth figures alone.
“Tunisia was growing at about 5.5 percent for almost seven years, and many international organizations were effusive in their praise of its achievements. What they didn’t look at were the growing inequalities and that an authoritarian model that was clearly denying rights to the people,” he said.
“We can no longer turn a blind eye to these issues. Today we have to keep an eye on whether economies are growing and ask if the fruits of growth are getting to the people.
“Because if they aren’t, this thing is not sustainable.”