How big is Africa’s economy? (3)

MUCH REMAINS TO be done if Africa is to be in better reckoning on a global turf: in economics, governance, real sector and wealth creation. A cursory look at the major global publications and broadcasts, especially the weekly and daily news outlets, might suffice to situate the relative obscurity of the continent compared to Europe, North America, Latin America, Middle East, Asia and Pacific. A 2012 World Bank report rated Africa’s economy as about the size of the Netherlands’ economy, which then was equivalent to only approximately six per cent of the U.S. economy. This is easily discernible in the less coverage and reporting of the continent, especially in the light of economic activities. Africa, however, has what it takes to turn the narratives around, and come to the fore in global reckoning.

Africa’s population is presently roughly four times that of the US. Yet, by output, the agro-economy of the US is a far cry from that of Africa. Africa’s food systems are currently valued at US$313 billion a year from agriculture, according to a report from “Growing Africa: Unlocking the Potential of Agribusiness.” Looking forward, the World Bank has expressed the optimism and hope that “Africa’s farmers and agribusinesses could create a trillion-dollar food market by 2030 if they can expand their access to more capital, electricity, better technology and irrigated land to grow high-value nutritious foods, and if African governments can work more closely with agribusinesses to feed the region’s fast-growing urban population.”

The U.S. agriculture sector, which has become an advanced industry, extends beyond the farm business to include a range of farm-related industries. The largest of these are food service and food manufacturing. According to the US Department of Agriculture (USDA), Economic Research Service, “agriculture, food and related industries contributed $1.053 trillion to (the) U.S. gross domestic product (GDP) in 2017 – a 5.4 per cent share. The output of America’s farms contributed $132.8 billion of this sum—about one per cent of GDP.” Globally, agriculture GDP between 1970 and 2017 rose from $0.9 trillion to $3.0 trillion in real terms, although the sector’s contribution to real GDP fell from five per cent to 3.9 per cent. This relative decline derives from a faster growth of non-agricultural activities compared to agriculture.

Electricity is a bedrock for industrial growth and a driver of economic development. But Africa lags behind other continents in electricity supply, a strong force for wealth creation. A publication by the World Bank and Energy in Africa observes that there exists a wide variation in energy use and development among African countries. Some – not necessarily self-sufficient or having surplus – export energy to neighbouring countries or the global market. Others struggle to have basic energy infrastructure. Industrial development and population growth within the continent have not been in steps. This is because Africa’s energy supply has been in deficit, falling far behind the requirements. Monopoly manipulation of energy markets occurs in countries where energy supplies still remain strictly under state control.

An old report of over four decades, titled ‘Man, Energy and Society,’ noted that energy in Africa was a scarcer commodity than in the developed world – putting annual consumption at 518 KWh in Sub-Saharan Africa, the same amount of electricity used by an individual in an Organisation for Economic Cooperation and Development (OECD) country (an example is the US) in 25 days. More recent figures still show that Africa is still coming from far behind in electricity supply. Terawatt-hour (TWh) is a measure of electrical energy. Key world energy statistics from the International Energy Agency (IEA) showed Africa’s electricity production in 2004 as 11,944 TWh, 2007 as 13,130 TWh, 2008 as 13,502 TWh and 2009 as 13,177 TWh. Compared with Africa’s energy production within the same period, Australia reportedly had 3,044 TWh in 2004, 3,364 TWh in 2007, 3,514 TWh in 2008 and 3,613 TWh in 2009. Well over 50 countries in Africa could therefore be said to have been producing three times more electricity than Australia, a single country, over the same period. This should provide an insight into the level of industrialisation and economy arising from it.

A 1997 World Bank publication on African Development Indicators, reminisced on many sustainable energy resources, of which only a small percentage have been harnessed. It added that just between five and seven per cent of the continent’s hydroelectric potential has been tapped, and only 0.6 per cent of its geothermal. A 2011 estimates place African geothermal capacity at 14,000 MW, of which only 60 MW has been tapped. “While Nigeria has 12 gigawatts of installed generating capacity only around 4GW is functional, compared to 1,000GW in the US,” The Financial Times disclosed in a special report on the future of energy, published in March, 2018. In Tanzania, 80 per cent of the population reportedly has no reliable access to electricity.

African countries have, for decades, operated electricity supply as a public sector monopoly despite the inefficiencies. Now, off-grid power generation, which is more in the private sector domain, is gaining traction. This increasingly popular off-grid energy supply could be from solar, wind, biomass or geothermal. Countries such as Kenya, Tanzania, Uganda, Rwanda, Nigeria, Cote d’Ivoire and even war-torn Somalia, are embracing solar energy solutions that help them power their homes even without being connected to the grid. Thus, they have found an easier, eco-friendly solution. In the future, this is expected to benefit the people living in cities in Africa, which are set to grow from around 500 million today to over 1.4 billion in the next few decades. “By 2025, there will be 100 African cities with more than one million people,” says McKinsey. The forecast by some analysts indicated that an $8 billion solar market beckons at Africa for going off-grid.

Africa’s aviation industry and economy are presently lacklustre and low in performance. Although a 2018 OECD report posited that Africa has 731 airports and 419 airlines with an aviation industry that supports around 6.9 million jobs and $80 billion in economic activity, there are only three major sub-Saharan intercontinental airlines, namely: Kenya Airways, Ethiopian Airlines, and South African Airways. The only profitable one is Ethiopian Airlines (not managed by the government). The others are deep red in financial losses running into hundreds of millions of dollars annually. Their survival depends on government bailouts. Also, a 2018 publication on Single African Air Transport Market by Deloitte, a consultancy, noted that “the liberalisation of civil aviation in Africa as an impetus to the Continent’s economic integration agenda led to the launch of the Single African Air Transport Market (SAATM),”more commonly referred to as the Open Skies Treaty.

According to Deloitte, “Africa is considered a growing aviation market with IATA forecasting a 5.9 per cent year-on-year growth in African aviation over the next 20 years, with passenger numbers expected to increase from 100 million to more than 300 million by 2026 and SAATM is a way to tap into this market.” From Deloitte’s research and conversations with industry stakeholders, “the low commitment from AU Member States is likely to be brought on by the treaty’s lack of a proper implementation framework.” For instance, the lack of freedom in African aviation costs the continent millions of jobs and billions of dollars are lost in investment every year. Protectionism, high taxes, and restrictive regulations are major obstacles to the growth of Africa’s regional aviation industry. Many African countries restrict their airspaces to prop up state-owned air carriers. That’s why it is notoriously difficult for private airlines to succeed in Africa.

With protectionism, new airlines are prevented from entering markets; existing companies are unable to offer flights of their choice; routes are predetermined and prices are inflated. These have negative impacts on economies of the countries. The experiences are the same in the East, West, South or North of Africa. Air Peace, a Nigerian private airline, encountered many obstacles in the prospective countries while exploring expansion into the West African regional markets. According a report released by Foundation for Economic Education, “it took several years of negotiations for fastjet, a low-cost private airline based in Tanzania, to get the traffic rights to fly” within Zimbabwe’s domestic routes. “It had originally taken three years for fastjet to even begin its operations in Zimbabwe, let alone dare to expand its domestic flights in the country.”

The Yamoussoukro Decision, a multilateral agreement with 44 signatories in 1988 is yet to be implemented in 2019 thirty one years after. It is hoped that the SAATM, launched in January 2018, will be implemented, even when only 23 states bothered to make the commitment. Unlocking the potential in the aviation industry will turn Africa’s economy around for good. Aviation Benefits 2017, an industry report, disclosed that, “of all global regions, the African aviation market is probably the one with the most potential for growth. Air transport supports 6.8 million jobs and $72.5 billion in GDP in Africa. This is still low compared with the Middle East region which continues to strengthen its hub position, with air transport supporting 2.4 million jobs and $157.2 billion in GDP. Africa’s pale into insignificance when juxtaposed with air transport’s support for 11.9 million jobs and $860 billion in GDP in Europe, or its support for 5.2 million jobs and $167 billion in GDP in Latin America and the Caribbean, or its supports for 7.6 million jobs and $791 billion in GDP in North America.

The growth of passenger traffic (measured in revenue passenger-kilometres (RPKs)) and load factors achieved by African airlines have been systematically below the world average since 2011. These all point to the fact that Africa’s economy is far lower than what the continent can muster. They point to reasons for the low economy and establish a strong basis for the need for a quick turnaround and economic revival. Efforts to boost African economy will be inadequate if these and other critical sectors of the continent’s economy fail to transform. The choice is now before the leaders in the continent. Will they continue to let these slip off their fingers as sands slip off the children’s hands while playing?