Economists believe that markets go through economic cycles that are similar and are therefore predictable. The variability lies in the speed at which they follow this trajectory.
By 2050, Africa will produce more GDP than the US and Eurozone combined today. Why then is the world so sceptical of Africa’s growth? Africa is the second-largest continent, a landmass second to Asia. It is also the second most populous continent with nearly one billion people. Already, the world’s riskiest countries are in Latin America and recent elections have shown over two thirds of the continent has undergone multi-party democratic elections. Perhaps part of the problem is that too many people make the inequitable comparison of Africa to Western nations instead of emerging markets at similar social and economic levels. Why not contextualise Africa’s growth and use that to better evaluate its tenacity?
Economists believe Africa is where India was in the early 1990s. Two decades after India gained independence, economic growth was 1% per capita, which was below population growth. In 1965, the country went to war with Pakistan which resulted in the withdrawal of foreign aid and caused currency fluctuations, abating investor interest. After three decades of sluggish growth, sceptics prophesied flagging economic progress. Few could predict the sustained 10% growth that India exhibited in the 2000s. Despite comparable challenges including weak infrastructure, rapid urbanisation and limited transparency, Africa has already demonstrated over a decade of high economic growth. And, like in India after it experienced the same, Africa should be poised for a similar outperformance. Renaissance Capital, an investment bank that focuses on high-opportunity emerging and frontier markets, believes that Africa is going to go from a $2 trillion economy today, to a $29 trillion economy by 2050.
Additionally, Africa’s access to technology and ability to implement best practices already tested and perfected by other economies presents a unique advantage. Africa’s population went from having no phones directly to mobile phones without the capital or investment in landlines. If the argument is that economic cycles are similar and predictable, then access to more robust technology and the ability to leverage experiences of other markets should result in highly accelerated growth. It took the UK over 300 years before it experienced the industrial revolution. Asia’s growth occurred within less than a century from independence. Africa is leapfrogging.
Nevertheless, critics argue that Africa continues to be heavily dependent on natural resources, which is an indication of both its elementary economic diversification and tenuous technological sophistication. Shocks from the global commodity markets have disrupted the flow of foreign exchange and have resulted in currency fluctuations. How much of an impact does this have in derailing Africa off the trajectory we have seen Europe traverse before the industrial revolution and Asia experience ahead of its unprecedented growth? Are these simply just growing pains or are these distinctive barriers? The dichotomy of Africa is the existence of strong performance metrics along with a young, educated middle class and spreading democratisation, against delayed perceptions in recognising the advancements taking place on the ground. We simply aren’t updating our views fast enough.
As Theodore Roosevelt said in 1910, “It’s not the critic who counts. The credit instead belongs to the man in the arena.” Change is here, Africa is demonstrating strong fundamentals. The question is, are we ready to acknowledge the shift?