The dilemma of delay in Africa’s rise

BEFORE THE JUNE 2010 report on Africa by McKinsey, a global consulting company, Africa was largely ignored by many pundits, influential media, global policy analysts, investment consultants, international investors, diplomats and even influential politicians in the West. US President George W. Bush, in one of his most famous blunders while in office, once referred to Africa as a country. Although his aides tried to explain it away, saying anyone can misspeak, that blunder, made by President Bush in Göteborg, Sweden, on June 14, 2001, did not go unnoticed. “Africa is a nation that suffers from incredible disease,” he said. This fits into the mindset of many outside Africa until recently. Africa had the misfortune of being labelled as the “dark continent” by some. Even The Economist magazine, in its May 13, 2000 edition, wrote off Africa in an alarmist title, as “The hopeless continent.”

Until the publication of McKinsey’s report, titled “Lions on the move: The progress and potential of African economies,” many international corporate businesses ignored Africa in their future strategies and growth plans for developing markets. African countries would probably be missing in the list of what was recently referred to as “emerging markets.” To many — if not most —  McKinsey’s report was positive on Africa and elaborated on prospects of the continent. For instance, it estimated Africa’s collective GDP at $1.6 trillion in 2008, although that was lower than the US state of California’s GDP of $1.95 trillion the same year. Interestingly, Africa was largely ignored by financial analysts in the build-up to and the aftermath of the 2008 economic recession, whereas Africa and Asia were the two regions where the collective economy rose through the global recession of 2009, by 1.4 per cent. But, the lack of reliable records could have hindered any attempt to figure out Africa’s resilience during the 2008 crisis. A huge informal economy that is hardly accounted for has historically been the dominant economy in the whole of Africa. The extent to which this was affected, or to which its isolation from the mainstream global economy helped in its stability could only be a guesswork at best.

For the purpose of illustration, a brief comparison between a continent and a country of almost the same population is hereby attempted. China’s population is currently estimated at 1.43 billion people, while Africa’s population is roughly 1.49 billion. Although China is one single country under one central government, Africa is made up of 54 different countries of diverse economic drivers and sizes, languages, laws, administrations and trade policies, which have largely bogged them down and slowed their economic growth. In less than two decades and a half, China rose from backwaters to become an indisputable contender for the slot of the largest economy and may very likely overtake the US soon. Its growth is linked to the advantages afforded it by the World Trade Organisation (WTO), a platform that provided favourable trade terms that enabled the country’s rapid rise. China’s WTO accession has also changed the global economic landscape. The Chinese economy grew rapidly, surpassing the United Kingdom, Germany and Japan and has become the third largest trading country after the United States and European Union. The growth of exports after China’s WTO accession resulted in a reduction in tariffs both on imports into China and tariffs placed on Chinese products. China’s rise in GDP has shown sharp contrasts before and after the accession. Before the December 2001 accession, annual increase in GDP per capita for China in 2010 US Dollars increased by 32 percent between 1997 and 2001. After 2001, there was an increase as the Chinese economy grew 49 percent over five years between 2002 and 2006.

The opportunities presented by the WTO were maximally utilised by China, a country that was still claiming the status of a developing country under the WTO rules until recently — a gimmick designed to gain incentives and sustain competitive advantages in trade negotiations. For Africa, the benefits of joining WTO still remain as elusive as a mirage. Even a continental trading platform (AfCFTA) that commenced operations over three years ago is yet to result in any remarkable growth in any particular countries, much less the entire continent of Africa. The revenues from commodities export, upon which most African countries depend, are low because they mostly export primary commodities in their raw, unprocessed forms. Moreover, the prices of most export products are unstable and unpredictable as they are determined by the importers. The entire African continent operates at the lowest end of the global value chains in which case the lowest proportion of wealth created along the value chains go to the primary producers while the final processors and end markets make disproportionately huge gains from the same commodity value chains.

Côte d’Ivoire, Kenya, Rwanda and DR Congo would be richer for the export of their cocoa, tea, coffee and cobalt respectively if the global commodity market rewards fair trade and not just promotes free trade, especially considering the imbalance in the negotiation powers of parties involved. Very much like the “Asian Tigers” of late 1990s, many “African Lions” would have probably emerged if their commodity exports had been fairly rewarded in the global market. Most of those commodity export-dependent economies remain weak and uncompetitive till now. It may be safely asserted that commodity export without a diversification of the economic base will not give any African country that much anticipated economic growth. African countries have missed the opportunity to establish themselves as manufacturing hubs. They are not leading in agriculture production as most countries don’t depend on mechanisation in most of their operations on the field and off the field. The service industry is presently poorly utilised and so it does not count for much in Africa’s economic matrix, unlike in the developed countries.

Although one of the bright spots in the continent is Angola, the economy is highly dependent on commodity trade, particularly in export of oil and agricultural commodities. So, like almost every other African country, Angola’s economic fortunes have been tied to earnings from commodities export and foreign market prices beyond the control of the exporting countries. In this case, it is tied to global oil demand, which brought volatile growth. But that has a serious downside: it has left the country with high levels of poverty and inequality. Apart from the export commodities’ earnings, the United Nations Conference on Trade and Development (UNCTAD) posited on Angola’s route to economic transformation, that “small businesses drive economic growth.” This is not too different in many other African countries, which have generally failed to tap into the resources that are critical to nations’ economic growth in contemporary times. One of them is the window of opportunities from the ICT and telecom industries. Generally, these two industries have created new paths to prosperity through online jobs, development of applications, digitally-enabled transactions, instant messaging or emails. These have proved beneficial as they have been facilitating as well as boosting many business enterprises, particularly in startups and small scale enterprises. A major hurdle to a widespread use of these channels is the challenge of electricity supply, the scale of which varies from country to country.

On a widespread scale, Kenya has proved exceptional over 15 years ago with the successful launch of a product that has gained wide acceptance and utility within and outside Kenya. M-PESA, Africa’s leading and largest fintech platform, was launched in 2007, now providing financial services to more than 51 million customers every month. This digital innovation became a success story and a poster child of digital financial inclusion, enabling electronic money transfer and used for storage of value on users’ mobile phones. This innovation has simplified daily lives and everyday transactions, becoming Kenya’s dominant mobile money service with at least one individual in 96 percent of Kenyan households using it. Although it is not the only Fintech platform now in Kenya, M-PESA was originally designed to serve unbanked or underbanked residents of the country. Now, it is used in six other nations in Africa. Over time, M-PESA mobile money banking has reportedly transformed the lives of users and their businesses. M-PESA has now proved useful as an electronic and digital financial platform beyond the shores of Africa. This clearly indicates that the continent can be a tech leader if the right environment that supports innovation is created and sustained. But, nearly 20 years after M-PESA, Africa is still waiting for another landmark digital innovation.

Another critical resource which Africa is yet to tap into is the burgeoning youth population. This is projected to grow in future more than anytime in the past further, as Africa’s population is expected to reach 2.5 billion by 2050. With continued future  growth in Africa’s youth population, it is both of tactical and strategic essence to tap into their potential as part of the wider strategies for driving inclusive growth and encouraging innovation. Going by the current youth population of 450 million between the ages of 18 and 35 now and an estimated 830 million by the year 2050, a lot remains to be done to safeguard this resource base from going into waste. Of this present 450 million youth population, no fewer than 10 million are engaged in risky desperate journeys in their attempts to migrate to Europe or Middle East. Provision of opportunities for lifetime fulfilment for this youthful population therefore becomes a moral imperative on African leaders as these younger folks will become leaders of the future. Any country’s leadership that marginalises the youth and fails to invest in them exposes the continent to future and present threats of economic failure, brain drain, social tension, youth criminality, unemployment, and political turmoil.

Drafting the youthful population into gangsterism, banditry and terrorists groups becomes easy for the vulnerable population of the youth. For mere pittance, they can easily be turned against their countries when they become radicalised and brainwashed. It is just a matter of time and the results of actions or inactions of the political leaders will become evident. The rising debts incurred by various countries in Africa will become future liabilities for the youth of today. These may further slow down or altogether foreclose their opportunities for meaningful career progression and ultimately their retirement prospects. On this issue of investment in the youth and tapping into their vast resources, Africa has performed far below expectations. It is making the future of Africa appear precarious and may permanently consign the future of Africa into the dustbin of irrelevance. A lot can still be salvaged now if national governments begin in earnest to take definite steps to remedy the anomaly. Failing to do so early and decisively, Africa’s rise could turn out to be short-lived or its progress could be permanently stifled in a world of fierce competition.

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