Optimistic view of Africa's economies

[BUTTERFLY: Nature Club of India]

Optimistic view of Africa's economies
http://www.thehindu.com/opinion/op-ed/article484148.ece

Celia W. Dugger Opinion » The Hindu, Op-Ed June 25, 2010

Africa is often depicted as a place of war, disease and poverty, with
a begging bowl extended to the world. A new report paints a much more
optimistic portrait of a continent with growing national economies and
an expanding consumer class that offers foreign investors the highest
rates of return in the developing world.

In a report released Thursday, McKinsey & Company, the consulting
firm, presented a bullish message to companies, arguing that “global
businesses cannot afford to ignore the potential.”

“The growth we've seen in Africa recently is much more widespread than
is generally recognized,” said Arend van Wamelen, an author of the
report based in Johannesburg for McKinsey, which advises domestic and
international companies investing in Africa. “There are a lot of
underlying good things going on in the economies.”

The report, titled “Lions on the Move,” includes an array of arresting
facts from the firm's business and economics research arm, the
McKinsey Global Institute. Since 2000, 316 million people on the
continent have signed up for cell phone service, more than the entire
population of the United States; Africa's billion people spent $860
billion in 2008, more than India's population of 1.2 billion.

From 2000 to 2008, African economies grew at twice the pace they did
in the 1980s and 1990s. Moreover, Africa was one of only two regions —
Asia was the other — where the collective economy rose through the
global recession of 2009, by 1.4 per cent.

In a clear sign of the reorientation of the economic landscape in
Africa, China has provided more financing for roads, power, railways
and other infrastructure in recent years than the World Bank. And in a
sign of increasing security, the number of serious conflicts in which
more than 1,000 people died annually declined to an average of 2.6 a
year in the 2000s from 4.8 in the 1990s, the report said.

Many advocates for democracy, the poor and people with AIDS would
probably offer a less rosy take on Africa's persistent struggles, but
the authors of the McKinsey report contend that the continent as a
whole has made solid progress on economic fundamentals.

Often, Africa's economic growth is seen as a result of the boom in
prices for its wealth of natural resources — oil, gold, platinum and
diamonds, among others. As an example of that, the continent's three
largest oil producers — Algeria, Angola and Nigeria — earned $1
trillion in oil exports from 2000 to 2008, compared with $300 billion
in the 1990s, the report found.

But the McKinsey researchers also concluded that rising commodity
prices directly accounted for only about a quarter of the increase in
economic growth in the 2000s.

Economic growth accelerated in 27 of the continent's 30 largest
economies, resource-rich and resource-poor alike, they found. Those
with great natural wealth grew at about 5.4 per cent a year in the
same period, while those not so well endowed grew at 4.6 per cent.

McKinsey attributed Africa's economic expansion to rising commodity
prices, greater political stability aided by a reduction in violent
conflicts, improved macroeconomic performance and market-friendly
economic reforms.

Africa's collective inflation rate fell to 8 percent after 2000, from
22 per cent in the 1990s. Budget deficits declined to 1.8 per cent of
gross domestic product from 4.6 per cent. A private sector emerged.
Foreign direct investment surged to $62 billion in 2008 from $9
billion in 2000.

“Obviously, there are places in terrible shape,” Wamelen said. “We're
not insensitive to that. But on the whole, if you look at the number
of people who are destitute, those numbers are falling pretty
drastically. The economic trickle down is there.

Some of the demographic trends praised in the report could turn out to
be double-edged swords. By 2040, McKinsey projects, Africa will have
1.1 billion working-age people, more than in China or India.

But even now, South Africa, one of the continent's most dynamic
economies, is not growing fast enough to absorb all the young people
entering the job market — or providing them with educations that would
equip them for the workplace.— New York Times News Service