The December issue of The Economist included an article, Africa Rising, which attributes the economic growth to several factors:
Higher revenues from natural resources: In 2000-08 around a quarter of Africa’s growth came from higher prices in resources such as iron ore, gold, diamonds…oil. Increased demand for resources by China has driven up prices, leading some African nations seeking to nationalize their mines. Perhaps this is a good move (but then again, I’m not an Economist), but I think something these nations need to keep in mind is that nationalization might look good when revenues are high, but with nationalization comes the responsibility to care for the companies on rainy days as well – which might not be the best idea with such nascent economies.
Growing middle class: Africa now has the fastest growing middle class according to the Standard Bank, which notes that around 60m Africans have an income of $3,000 a year, and 100m will in 2015. Although that is not at all ‘middle class’ to us living in the West, it is significant growth in both income and numbers for Africa.
Technology: Technology in Africa is booming. All I needed to do in Sierra Leone was ask to see someone’s cell phone and in response, three were taken out of various pockets. Cell phones are not only on the rise, but so is internet access as well as the social media presence of Africans both on the continent and in the diaspora (Did you see the #WhatIloveAboutAfrica trend that took off on twitter in response to the Invisible Children #Kony2012 campaign?). This increased access to technology is significantly facilitating business dealings, making Africa all the more attractive for businesses and investment.
The Case for Rwanda
Rwandan Economic and Social Info.
Source: World Bank Blogs
Nb.: Need for Sustainable Growth
It’s not all downhill from here though. The continent has made significant strides in the right direction, but if the growth is to continue (which we obviously all want it to), then a few things need to be considered:
Very true sign in a development office in Sierra Leone
Corruption: Economic growth is not in itself sufficient to reduce poverty. Countries could have immense GDP growth, yet if corruption is pervasive, all profits could be diverted to a small ruling elite while the rest of the country languishes. That's why fighting corruption will remain key. It’s also important for countries not to just put on the façade of fighting corruption, like Sierra Leone. Salone puts up billboards stating the progress is being made in combating corruption, yet behind closed doors, President Koroma participates in illegal logging deals, and bribes are still taken roadside to get anywhere. If this keeps up, the road towards alleviating poverty will be very long.
Monitoring elections: The continent has made great progress in freer and fairer elections, but it needs to continue that trend if growth is to continue. If elections are contested it could disrupt the political stability within a country and discourage investors in fear of turmoil and uncertainty.
Sustainable growth: As the article stated, much of the surge in GDP rates is attributed to resource wealth. Yes, resources are great if their profits are used in the right manner, but the resource market is cyclical and can’t be depended upon. That means in hard times, countries still need to have something to fall back on for economic growth. This can be done by strengthening the manufacturing sector. Take note, Africa.
No one can do business on roads like these!