Fresh reason for optimism about Africa’s growth prospects

Something changed, probably irreversibly, in the continent’s narrative, writes David Pilling

THE “Africa rising” narrative gained momentum around 2010. As is the way with these things, it arrived about a decade late and just as things were about to go pear-shaped.

Investors, hungry for yield, alighted on the only continent where living standards had not yet visibly begun to converge on those in the West. Their bet was that Africa had turned a corner. Were they wrong?

These days, the mood has darkened. Nigeria and South Africa, which account for half of sub-Saharan Africa’s GDP, are at or close to recession. Nigeria squandered its oil boom. Longsluggish South Africa has failed to meet its black majority’s pent-up expectations. The hopes of other resource-rich countries, including Angola, Mozambique and Zambia, have faded with commodity prices.

A flawed election in Uganda, plus a cavalcade of leaders clinging grimly to power, from Zimbabwe to Burundi, undermine the idea that governance is on the mend. Those who helped change the Africa narrative, however, are sticking to the script. Among the true believers is consultancy McKinsey, whose 2010 “Lions on the move” report did much to feed the original story.

This week it published a follow-up. Call it Africa rising: the sequel. McKinsey bases its optimism on several factors, some more credible than others. The story of Africa sinking, it says, is overdone. Strip out Nigeria, South Africa and North Africa, and the rest of the continent has not slowed. Growth in subSaharan Africa minus its two biggest economies actually accelerated from 4.1% in 2000-10 to 4.4% from 2010-15. Countries such as Kenya, Tanzania, Rwanda, Ethiopia and Ivory Coast are growing faster than that. Granted, Nigeria and South Africa are pretty big lions to be refusing to budge — unless going backwards counts as motion.

But qualified success in the rest of the continent suggests that other factors, including demographics and technology, are having an impact.

Some say that Africa is about to become the world’s fastesturbanising region. Over the next decade, nearly 190 million more Africans will live in cities. By 2034, Africa will have the world’s biggest working-age population.

More people can be bad news if there are no jobs, but McKinsey’s research suggests job creation is outpacing labour force growth at 3.8% a year versus 2.8%.

Household spending, it predicts, will grow 3.8% a year to reach $2.1trillion by 2025, with half of that in just 75 cities. That gives the 400 African companies with revenue of more than $1-billion a year scope to consolidate and expand.

McKinsey also singles out technology. Cellphone use in several countries is already on a par with the US. By 2020, smartphone penetration is expected to rise from today’s 18% to 50%. Availability of mobile money in several countries enables new businesses to set up on the back of secure payments systems. There are new forms of algorithm-derived credit and access to services, paid for with electronic money, such as off-grid solar power. McKinsey sees the potential for technology to transform health and education.

It is easy to pick holes. A lot of the “growth” comes through the simple addition of people. Stubbornly high fertility could deprive Africa of the demographic sweet spot, expanding workforce and low dependency ratios, that propelled takeoff in several Asian countries. The transformational power of technology, too, can be exaggerated.

Unless governments provide basic infrastructure, technology will be more of a scrappy fix than a productivity-enhancing miracle.

Still, step back and something is going on. Africa post-2000 is reminiscent of China post-1979, when Deng Xiaoping’s pro-market reforms began, and India post-1991, after the dismantling of the Licensed Raj. In those countries, too, there was a lag between inflection point and general recognition that something definitive had changed.

The Africa story is necessarily messier. There is no single government driving change.

Yet growth was hardly even in China or India either. The difference in wealth between Bangalore and Uttar Pradesh is probably no greater than that between Nairobi and the Liberian forests, or between Mauritius and South Sudan.

Africa’s growth will be uneven and fitful. It may not even be helpful to speak of Africa at all. Yet something changed, probably irreversibly, in about 2000. Give it another decade or so and we may be able to say that with more conviction. —©The Financial Times

Some say that Africa is about to become the world’s fastesturbanising region McKinsey’s research suggests job creation is outpacing labour force growth