Africa’s Lion Economies – What Are They Getting Right?

Africa’s Lion Economies – What Are They Getting Right?

While most stories out Africa — that make it into the Western press — tend to paint a perpetually gloomy picture of a continent in turmoil, behind the scenes an economic revolution is taking place which promises to lift millions out poverty. So, which countries are Africa’s economic lions and what is behind their record of growth?

According to data from the World Bank, in the nine years between 2003 and 2011 – the last year for which data is available – Africa as a whole grew a very respectable five percent a year. Compared to recession-wracked Europe and continuing slow economic growth in the United States, this is quite impressive.

What is truly remarkable, however, is the sheer number of high-growth countries in Africa. Twelve countries: Equatorial Guinea, Angola, Ethiopia, Chad, Uganda, Nigeria, Rwanda, Ghana, Mozambique, Sudan, and Tanzania have all on average experienced an annual seven percent increase in per capita GDP for a decade – with no indication as of yet that any of these economies will slow down anytime soon.

The source of this economic success varies country-by-country, but some trends are evident. First, the global boom in oil prices, which peaked in 2008 at $145 per barrel in 2008 but has since hovered in the $100 per barrel range, has proven to be a terrific stimulant to Africa’s oil-rich states. Furthermore, it has stimulated oil and gas exploration and development across the continent as multinational oil firms rush to buy up production concessions. This is most evident in East Africa, which has become a new global hotspot for oil and gas prospectors from around the world.

But oil is not the only resource to set off a boom in Africa’s commodity-export economies. Growing Chinese and Indian growth has created a boom in other resource industries as well, ranging from gold mining to agriculture. The latter has been substantial for Ethiopia, whose agricultural sector grew ten percent last year.

As the world turns to Africa to satiate its demand for natural resources, the problem of getting those resources to market presents itself — as does growth in the area of infrastructure development. Ethiopia is once again a good example of this as the government, in association with foreign partners, is busy damming the Nile – which could produce huge amounts of energy for both domestic consumption and foreign export. Also in the works is a planned electrified rail system that will greatly alleviate road congestion in Africa’s fastest-growing, non-oil economy.

All of this development is leading, in turn, to an increasingly urbanized continent. According to the World Bank, 41 percent of Africa’s people live in cities, with urbanization growing at the rate of one percent every two years. At that pace, Africa will match the rest of the world in urbanization rates sometime in the 2030s.

Growth in the urban population, a natural resource boom, and an increase in infrastructure investment may also provide the key with which to unlock the final ingredient of long-term economic growth – manufacturing. While Africa’s traditional manufacturing power – South Africa – has had trouble of late, foreign companies in search of low-wage labor are also scouring the continent in search of opportunity.

A major Chinese shoe manufacturer, for instance, announced this past June its plans to set up operations in Ethiopia. This follows up on China’s announced intention to open factories in Africa in order to jump-start the continent’s manufacturing sector – which would conveniently give Chinese multinationals another pool of cheap labor to draw from as growth pushes up wages in China itself.

Going forward it appears that Africa’s long-suffering people may finally have an extended opportunity to bridge the yawning development gap between their continent and the rest of the world — and in so doing change global perceptions of Africa and Africans. Instead of being a place to avoid, Africa is now a hot place to do business as Chinese firms and Western investment funds pour money into African economic projects promoted by farsighted governments and risk-taking entrepreneurs. The future, so far, looks bright.