MkenyaMzalendo
Senior Member
- Sep 12, 2010
- 171
- 16
FOR once an investment fad seems justified: the 21st century is shaping up to be that of the emerging markets, just as the 20th was Americas century and the 19th Britains. But that leaves open the question of which countries, exactly, will emerge. Will Asia and Latin America mark the limits of the spreading prosperity? Or will the boom reach the perennial laggard, Africa? Will a new pride of economic lions take their place beside the Chinese dragon and the Indian tiger?
Ten years ago The Economist dubbed Africa the hopeless continent. Since then its progress has been remarkably hopeful. In 2000-08 Africas annual output grew by 4.9% (adjusted for purchasing-power parity), twice as fast as in the 1980s and 1990s and faster than the global average of 3.8%. Foreign direct investment increased from $10 billion to $88 billionmore than India ($42 billion) and, even more remarkably, catching up with China ($108 billion). The Boston Consulting Group notes that, since 1998, the revenues of Africas 500 largest companies (excluding banks) have grown at an average of 8.3% a year.
But is this growth sustainable? Or is the current fad for Africa just another bubble? The pessimists have always had three strong arguments. One is that African politics is dysfunctional. Warring strongmen can undo the progress of decades in weeks. A second is that the African economy is unduly dependent on the resource sector. A third is that Africas growth does too little to benefit the poor. But over the past decade, all these objections have weakened.
The numerous examples of government failure can now be weighed against examples of success. The continents inflation rate has been reduced from 22% in the 1990s to 8% since 2000. The World Banks annual Doing Business report ranked Rwanda as the worlds top reformer this year, based on the number and impact of steps to promote entrepreneurship there. Mauritius was ranked 17th of the 183 economies covered by the report, ahead of lots of richer places.
It is true that Africa has depended on its abundant natural resources; and they will be a growing advantage in years to come. The hectic pace of growth in the emerging world is not only pushing up commodity prices but also intensifying competition for the right to drill the continents oil and mine its minerals. Chinese companies in particular are wooing African governments with lavish expenditure on infrastructure.
McKinsey points out that the natural-resource sector accounts for only about a third of the continents growth. Africa is producing a growing number of world-class companies outside the resource industry, from South African giants such as SABMiller, the worlds second-largest brewer, and Aspen Pharmacare, the largest generic-drugmaker in the southern hemisphere, to niche players such as Tunisias Coficab, one of the worlds most successful suppliers of wiring for cars.
As to the poor, McKinsey points out that, thanks to rising living standards, some 200m Africans will enter the market for consumer goods in the next five years. The consultancy also notes that the continents working-age population will double from 500m today to 1.1 billion in 2040. Consumer-goods companies ranging from Western giants such as Procter & Gamble to emerging-market car companies such as Chinas Great Wall and Indias Tata Motors are pouring into Africa. Foreign firms are likely to start using Africa as a base for manufacturing as well, as Europes population shrinks and labour costs in India and China rise.
Africa is also seeing the benefits of frugal innovationinventions that are designed to serve the poor. Mobile-phone companies, which have done more than anybody to improve the lives of poor Africans, are continuing to innovate. Kenyas Safaricom and its rivals are pioneering money-transfer by mobile phone (see article); mobile savings and agricultural-insurance schemes are next. Companies from other emerging markets are also expanding into Africa. Bharti Airtel, which completed its $10.7 billion acquisition of Zain Africa, is a world-leader in improving services while reducing costs.
Nor is innovation confined to telecoms. Vijay Mahajan of the McCombs School of Business at the University of Texas, Austin, produces a long list of innovators in everything from the design to the distribution of products. Nakumatt, a Kenyan retailer, allows people living abroad to buy vouchers for its stores and then transfer them to their African friends and relatives, making remittance payments smoother. Other bottom-of-the-pyramid innovations include the Jiko, a portable charcoal stove that can reduce fuel consumption by 30%; the Q-drum, a doughnut-shaped plastic container that can be used to transport water by rolling it along the ground; the Weza, a foot-powered generator that can be used to charge cell phones and radios; and a $20 washing machine made from discarded motors and iron.
Lions and bulls
A decade of growth has also given Africas business people a new élan. Mo Ibrahim, a mobile-phone pioneer, has established an index to measure governments performance and an annual prize of $5m, plus $200,000 a year for life, to an African leader who rules well and then stands down. He has also founded a venture fund which plans to invest $200m in Africa this year.
Such successful entrepreneurs can point to countless examples of how business can improve peoples lives. In Kenya, where the government has removed its dead hand from the telecoms market, mobile phones are ubiquitous; in next-door Ethiopia, where the governments grip is as tight as ever, only 2% of the population has phones. A few African lions are beginning to take their place next to the dragons and tigers.
Schumpeter: Uncaging the lions | The Economist
Ten years ago The Economist dubbed Africa the hopeless continent. Since then its progress has been remarkably hopeful. In 2000-08 Africas annual output grew by 4.9% (adjusted for purchasing-power parity), twice as fast as in the 1980s and 1990s and faster than the global average of 3.8%. Foreign direct investment increased from $10 billion to $88 billionmore than India ($42 billion) and, even more remarkably, catching up with China ($108 billion). The Boston Consulting Group notes that, since 1998, the revenues of Africas 500 largest companies (excluding banks) have grown at an average of 8.3% a year.
But is this growth sustainable? Or is the current fad for Africa just another bubble? The pessimists have always had three strong arguments. One is that African politics is dysfunctional. Warring strongmen can undo the progress of decades in weeks. A second is that the African economy is unduly dependent on the resource sector. A third is that Africas growth does too little to benefit the poor. But over the past decade, all these objections have weakened.
The numerous examples of government failure can now be weighed against examples of success. The continents inflation rate has been reduced from 22% in the 1990s to 8% since 2000. The World Banks annual Doing Business report ranked Rwanda as the worlds top reformer this year, based on the number and impact of steps to promote entrepreneurship there. Mauritius was ranked 17th of the 183 economies covered by the report, ahead of lots of richer places.
It is true that Africa has depended on its abundant natural resources; and they will be a growing advantage in years to come. The hectic pace of growth in the emerging world is not only pushing up commodity prices but also intensifying competition for the right to drill the continents oil and mine its minerals. Chinese companies in particular are wooing African governments with lavish expenditure on infrastructure.
McKinsey points out that the natural-resource sector accounts for only about a third of the continents growth. Africa is producing a growing number of world-class companies outside the resource industry, from South African giants such as SABMiller, the worlds second-largest brewer, and Aspen Pharmacare, the largest generic-drugmaker in the southern hemisphere, to niche players such as Tunisias Coficab, one of the worlds most successful suppliers of wiring for cars.
As to the poor, McKinsey points out that, thanks to rising living standards, some 200m Africans will enter the market for consumer goods in the next five years. The consultancy also notes that the continents working-age population will double from 500m today to 1.1 billion in 2040. Consumer-goods companies ranging from Western giants such as Procter & Gamble to emerging-market car companies such as Chinas Great Wall and Indias Tata Motors are pouring into Africa. Foreign firms are likely to start using Africa as a base for manufacturing as well, as Europes population shrinks and labour costs in India and China rise.
Africa is also seeing the benefits of frugal innovationinventions that are designed to serve the poor. Mobile-phone companies, which have done more than anybody to improve the lives of poor Africans, are continuing to innovate. Kenyas Safaricom and its rivals are pioneering money-transfer by mobile phone (see article); mobile savings and agricultural-insurance schemes are next. Companies from other emerging markets are also expanding into Africa. Bharti Airtel, which completed its $10.7 billion acquisition of Zain Africa, is a world-leader in improving services while reducing costs.
Nor is innovation confined to telecoms. Vijay Mahajan of the McCombs School of Business at the University of Texas, Austin, produces a long list of innovators in everything from the design to the distribution of products. Nakumatt, a Kenyan retailer, allows people living abroad to buy vouchers for its stores and then transfer them to their African friends and relatives, making remittance payments smoother. Other bottom-of-the-pyramid innovations include the Jiko, a portable charcoal stove that can reduce fuel consumption by 30%; the Q-drum, a doughnut-shaped plastic container that can be used to transport water by rolling it along the ground; the Weza, a foot-powered generator that can be used to charge cell phones and radios; and a $20 washing machine made from discarded motors and iron.
Lions and bulls
A decade of growth has also given Africas business people a new élan. Mo Ibrahim, a mobile-phone pioneer, has established an index to measure governments performance and an annual prize of $5m, plus $200,000 a year for life, to an African leader who rules well and then stands down. He has also founded a venture fund which plans to invest $200m in Africa this year.
Such successful entrepreneurs can point to countless examples of how business can improve peoples lives. In Kenya, where the government has removed its dead hand from the telecoms market, mobile phones are ubiquitous; in next-door Ethiopia, where the governments grip is as tight as ever, only 2% of the population has phones. A few African lions are beginning to take their place next to the dragons and tigers.
Schumpeter: Uncaging the lions | The Economist