Africa: the next economic tiger?-Chrystia Freeland
Thu Oct 18, 2012 6:57pm GMT
By Chrystia Freeland
NEW YORK Oct 18 (Reuters) - If you are looking for some good cheer in a
pretty gloomy world, consider the growing consensus among some of the
world's smartest money that the next big emerging market may be Africa.
Above all, that is great news for Africans: As we have seen across so much
of Asia, economic growth has accomplished what decades of well-meaning
development efforts failed to do, lifting hundreds of millions out of
poverty. If that happens in Africa, the world will be transformed.
This case for Africa as the world's new economic tiger is made forcefully in
"The Fastest Billion: The Story Behind Africa's Economic Revolution," a
data-packed collection of essays to be published at the end of this month
and brought together under the aegis of Renaissance Capital, an investment
firm with Russian roots and global ambitions.
The consensus view among many students of the global economy is that
investment decisions are about choosing, in the words of Mohamed A.
El-Erian, chief executive of the fund manager Pimco, "the cleanest dirty
shirt": The United States faces a fiscal cliff and political gridlock,
Europe is tenuously poised between years of painfully slow growth and
outright collapse, and even go-go China is slowing.
By contrast, in the view of Stephen Jennings, the Renaissance chief
executive, Africa is on a tear. "It is the only region in the world where
growth is accelerating," he said by phone from Moscow. "If you strip out
South Africa, the rest of the region is actually growing very, very
quickly."
Jennings says he believes Africa is following the path to economic
development that has been trod in recent decades by countries like Brazil,
China and India - only in Africa the transformation is happening even
faster.
"The chances are this will be like Asia and this will go on for the next 30
years," Jennings said. "It is helpful to remember where Asia was in the
early 1970s. Then, most of the wars were in Asia, the lowest GDP and life
expectancy were in Asia. People thought that was Asia's lot."
We hold those same prejudices, only more deeply, when it comes to Africa,
Jennings argued. But, quietly, Africa has been remaking itself.
"It is not something that we are predicting - it is something that is
happening," he said. "You have this very broad-based, Asia-like process of
modernization."
Jennings, who pointed out that Kenya had halved infant mortality in five
years, an improvement it took India 25 years to achieve, predicts that
within a generation, Africa's place in the world will be utterly changed. By
2050, he believes Nigeria will be the most populous country in the world and
the African economy will be bigger than that of the United States and Europe
combined.
Jennings is not alone in predicting an African renaissance. Two years ago,
McKinsey, the management consulting firm, put a savanna spin on the emerging
market cliche in a report titled, "Lions on the move: The progress and
potential of African economies."
Foreshadowing "The Fastest Billion," this report painted a picture of an
Africa whose economic pulse "has quickened," with gross domestic product
rising 4.9 percent per year from 2000 to 2008. "While Africa's increased
economic momentum is widely recognized, less known are its sources and
likely staying power," the McKinsey study argued. "Our analysis suggests
that Africa's long-term economic prospects are quite strong. Global
businesses cannot afford to ignore the potential."
An obvious source of Africa's new might is the surge in commodity prices,
and both reports acknowledge the impact of natural resources. But they also
have a shared conviction that domestic factors are at play. The predictable
one is improved governance.
Less predictable is the joint celebration of Africa's excellent
demographics. Not so long ago, Africa's tragedy was its children - now that
is why the global elite think Africa may be a strong bet. This is just the
beginning of a revolution in our thinking about babies and the economy: The
Industrial Revolution transformed children from a family's labor force to
its luxury good. That is still the case; but for the national economy,
babies are becoming the most precious resource of all.
Both McKinsey and Renaissance have produced hopeful documents, and for a
continent that mostly gets hand-wringingly gloomy news coverage, that is a
very welcome perspective. But it is worth challenging one optimistic
assumption, particularly because of its wider implications.
That is the view that in Africa, economic growth and democracy will go
together. Their synonymity is a comfortable belief. But in Africa, as in
other emerging markets like China, Russia and even Turkey, it may not be
true.
For example, Mohamed Keita, Africa advocacy director at the Committee to
Protect Journalists, argues that in countries that are cracking down on
freedom of the press, like Ethiopia, economic growth deflects attention from
growing authoritarianism rather than undermining it.
This is the Putin model, or the Beijing model - forget about ephemeral
concepts like free speech and pluralism in exchange for a swiftly increasing
GDP. It is not just impoverished domestic electorates that are tempted by
this siren song. Western investors and many Western governments find it
equally convincing. But the emerging market lions - and the tigers and the
Siberian bears - should ask themselves how long authoritarian growth can be
sustained.
C Thomson Reuters 2012 All rights reserved
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Received on Thu Oct 18 2012 - 17:01:38 EDT
