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Chapter 2

Africa Comes of Age

In a world looking for the next investment frontier, the African continent stands out as the next major contributor to global growth. The years to 2050 will make millions of Africans more prosperous. The challenges will be to leverage the continent’s core strengths in commodities, agri-business and a young populace, to ensure that economic growth goes hand in hand with strides in infrastructure development and accountable governance, and to filter real benefits down to Africa’s people.

Long characterised by negative global perceptions, largely as a result of the devastating effect of colonisation and post-colonial mismanagement, Africa and its rise will be a dominant feature of global trade for some time to come.

By 2050, a quarter of the world’s population will be located in Africa[1]. The effect of the population explosion is likely to propel the continent onto the front burner of both economic and political change. Africa is likely to overtake the population size of China and India by 2030. Clearly, issues such as poverty alleviation, economic growth and the rise of the middle classes will shift from being a purely Chinese or Indian phenomenon (in terms of size) to being an African feature.

Analysts are beginning to compare the continent of Africa with China and India. Although problematic because a continent is being compared to individual countries, this will serve to highlight the vast numbers of people in different regions of the world, all developing along a fairly rapid and simultaneous continuum. Using Africa in the continental sense does obscure the very real and severe regional and state-wide differences, but overall macro-trend projections for the continent can be largely true for even the most failed state or under-developed region. As macro-trends go, Africa’s share of the global population has increased from a mere 9 percent in 1960 to 15 percent in 2010. By 2050, this will have risen to 23 percent – substantially larger than China or India[2].

These seismic shifts in population growth are set to transform certain regions more than others. Already the focus of much market attention, both East and West Africa are likely to see the biggest demographic add-ons.

Huge increases in population might make the average reader lament the continued population ‘time bomb’ facing the continent. While poverty levels are likely to remain far too high, Africa’s share of younger people is likely to rise, not because of dramatically increased fertility rates and larger families, but as a result of a relative drop in the number of workforce members – aged 15–65 years – in the other major population centres of China and India. From 2030, Africa’s share of younger people will begin to dramatically outstrip that of both China and India as their fertility rates fall back (see Chapter 6).

A rise in younger working-age men and women in Africa – perhaps as many as 1.1 billion by 2040 – creates the potential for both economic advancement and social dislocation. It therefore won’t be surprising to see a contradiction occur across the continent, where societies that don’t open their economies, liberalise trade conditions and curb corrupt governance continue to languish as failed states – and even rogue states. South Africa, as economically advanced as it might be, already grapples with one of the highest unemployment rates for any country of its level of development. Pockets of failures will therefore continue to destabilise vast swathes of the continent, despite the positive trends.

The good news is that the African workforce is growing in greater proportion to that of other continents. This means that the workforce, if adequately trained and integrated into the demands of the global economy, can become a sought-after commodity. With a decline in the number of work-active humans across the developed world, the future of the global workforce might be in China and India until 2030, but for long-term investors beyond that Africa will be sought as a pool of human talent.

Along with the broader trend of mass urbanisation across the planet, urban growth rates in Africa are now the highest in the world. By 2050, 61 percent of Africa will be urbanised (from an estimated 38 percent currently). African cities are swelling rapidly. The population of a ‘mega-city’ like Lagos swelled from 300 000 in 1950 to around 15 million in 2007 and is expected to reach more than 25 million by 2015[3].

Improvement in aspects of human development, such as levels of education and access to better health care, are contributing to a new urban culture. Literacy rates in particular are growing at a rapid pace; they are now at about 65 percent of the African population and projected to be almost 90 percent by 2050[4].

Life expectancy rates are improving, with the notable exception of South Africa as a result of inadequate hiv prevention for much of the last decade. Communicable diseases are being brought under control, to be replaced by a more ‘normal’ pattern of concern for chronic diseases and social problems. By 2050 it is expected that under- or malnutrition rates may be similar to incidences of obesity, proving the changing nature and normalisation of African society.

Africa’s economy and trade grow

If Africa is to shed its shackles of negativity, then the recently released McKinsey research report, Lions on the Move[5], is a wake-up call to potential investors still unsure about the future growth of the continent.

Africa’s economy is starting to show impressive growth – and in many cases, really rapid growth. Africa’s collective gross domestic product (gdp), at US$1.6 trillion in 2008, is now roughly equal to that of Russia or Brazil. Africa’s billion people spent $860 billion in 2008, more than India’s population of 1.2 billion. Considering that India has recently been considered one of the globe’s key consumer markets for the coming decade, the growth in purchasing power of the average African is nothing short of startling.

Importantly, this growth continued during the global economic crisis from 2007–2010; the continents of Africa and Asia were the only two regions of the globe to score positive growth. Africa’s ability to withstand the global battering sets a critically positive trend for the future.

Such resilience was largely the result of sound policies in place before and during the financial crisis, which enabled most countries to use fiscal and monetary policy to dampen adverse effects. It was also a function of the limited global exposure from Africa’s banks to the global market. Before, during and even after the crisis Africa has been characterised by steady growth, low inflation, sustainable fiscal balances and public debt, as well as rising foreign exchange reserves[6]. If Africa was able to navigate through such a storm with relative ease, especially when compared to the disasters of Ireland, Greece and Portugal, then together with projected future improvements in social conditions and prospects, the continent is exceptionally well placed to build on its resilience.

Africa’s growth acceleration is currently geographically dispersed across much of the continent although it must be analysed with caution because impressive growth rates often don’t translate into a meaningful improvement in the lives of ordinary citizens; elite monopolisation of resources often retains wealth in the hands of the politically well-connected few.

Notwithstanding this cautionary note, 27 of the 30 largest economies on the continent have expanded rapidly since 2000. All economic sectors contributed, including resources, finance, retail, agriculture, transportation and telecommunications. The direct causes of Africa’s growth surge were improved political and macroeconomic stability, and microeconomic reforms.

Africa has seen some of the fastest-growing economies in the world, but also some of the slowest, including several in decline. Angola, bolstered by oil fields, is the third-fastest-growing economy in the world. This contrasts with Zimbabwe, which is experiencing a precipitous decline, based on a lack of natural resources coupled with a disastrous series of economic policy choices and deteriorating democratic governance.

Clearly, commodity-strong economies resulted in some of the world’s highest advances in gdp. Three of the world’s ten fastest-growing economies are currently African[7], with some having been at times the fastest-growing in the world. Equatorial Guinea, for example, reached 75 percent growth in 2004 because of oil production. Angola, Ethiopia, Rwanda and Mozambique have regularly equalled or even exceeded a gdp of 10 percent, and these examples are likely to persist in future. The International Monetary Fund estimates that gdp in the 47 countries of sub-Saharan Africa rose 5 percent in 2010 – pretty impressive given the global recession[8].

Africa’s gdp will increase to approximately $2.6 trillion in 2015, a rise of almost a trillion dollars in only seven years. Economic growth will expand by an annual average real rate of 5.5 percent each year through the five-year period. The surge will be led by rapidly expanding economies like Ethiopia, Mozambique, Tanzania and Zambia but, importantly, will be underpinned by robust growth in large regional heavyweights like Egypt (assuming a peaceful democratic transition), Angola, Kenya and Nigeria. More meaningful economic recoveries in advanced economies in the later part of the forecast period will support economic advancements in commodity exporters. The next five years will manifest further financial market deepening, and currency and asset appreciation across Africa[9].

Africa’s total trade will maintain recent trend growth, expanding by an impressive average of 17 percent per year. A number of structural and policy-induced improvements will serve to maintain Africa’s improved position in world trade. Africa’s share of global trade is in line to almost double, from 3.2 percent currently to 6 percent in 2015, clearly reversing its historically marginalised position. It is important to recognise that Africa’s share of world trade bottomed at 1.7 percent in 2001, then doubled to 3.2 percent in 2009, and is now expected to double again between 2010 and 2015[10].

Oil in Africa has created ‘wealth spots’ where a few countries have exceeded their neighbours in affluence. As the potential for peak oil looms in the mature oil-exporting nations of the world, expect some similar growth spikes in countries like Ghana where new deposits have been found. African oil discoveries are likely to be a driving force for major growth as the industrialised world turns its attention to some of the planet’s last untapped reserves. In Ghana’s case, its more transparent democracy can ensure that enhanced commodity revenues (estimated initially at around $1 billion a year) place the country firmly on the global map, thereby raising its voice in international forums and on issues of global concern.

What these countries often lack in distributing their wealth to their citizens, they make up in developing a power dividend. They attract the attention of large corporates and countries alike. They become the focus of diplomatic initiatives from countries in need of shoring up their own supply of scarce natural resources. A democratic dividend won’t necessarily be the defining positive spin-off from impressive gdp results, but rather an enhanced global attractiveness (and assertiveness) for foreign investment and elite-based agreements – even if only partial lip service is paid to democratic accountability and transparency. Expect smaller commodity-rich African states to become global household names, their presidents courted from Beijing to Brasilia, even though riches and rising gdps are no immediate panacea for ending corrupt governance.

So despite the continuation of a battle to enhance democracy, a key feature of the future will be a rise in overall wealth of Africans. Already, if one takes an economic measurement like Gross National Income per capita (gnp/per capita), the average African is wealthier than his Indian counterparts[11]. If placed as a single market, Africa would already be the tenth largest on earth. Similarly, the populations of Africa’s wealthiest 12 countries based on the same gnp/per capita matrix are already wealthier than the average Chinese[12].

Global business looks to African consumers

With these levels of economic advancement, Africa will soon be courted by global corporates from more mature developed markets. With profits static at best and likely to remain so following the effects of the global financial crisis, foreign companies will be seeking to tap into this hitherto virgin market. With 900 million consumers on the continent, the problems and pitfalls in doing business in Africa are quickly being outweighed by the promise of a market clamouring for goods and services.

The signs are already there. Foreign service providers in the retail, telecommunications and financial services sector are fast realising that Africa holds the key to new consumers and will provide an ever-increasing component of bottom-line profit as spending cuts, reduced retirement funds and decreased social benefits take a toll in the West. In Kenya, a battle between units of Britain’s Vodafone Group and India’s Bharti Airtel has driven down the consumer’s cost of a text message to just a few cents. Yum Brands of the United States recently said it wants to double its kfc outlets on the continent over the next few years to 1 200[13]. Indeed, the rate of return on foreign direct investment in Africa is higher than in other developing countries, outstripping even Asia.

The desire by US consumer giant Wal-Mart to enter Africa via a $2 billion controlling stake (51 percent) in South Africa’s Massmart is one of the most noteworthy steps thus far in the recognition of the African consumer as a global player to come. This is all the more significant because Wal-Mart has historically had little or no exposure in Africa.

Wal-Mart’s growth in the United States is slowing. In its 2010 annual report, the company reported net sales of about $260 billion in the United States, which is a 1.1 percent increase from net sales in 2009. In contrast, US net sales in 2009 increased 6.9 percent from the year before[14]. Looking to developing markets has long been a feature of Wal-Mart’s Chinese expansion, but Africa always seemed a rather distant – and perhaps feared – alternative.

While in the medium term African consumers may become the big winners because Wal-Mart has impressive if not controversial global expertise in bringing low-cost basics to lower-end markets, another big winner will be South African business. Long seen as service leaders on the continent, the plethora of outstanding corporate entities in critical service industries are likely to make South African companies the flavour of the decade and ripe for foreign takeovers. We can therefore expect a battle between the country’s forthright, often aggressive trade unions and private capital keen on becoming part of a global enterprise.

It is worth noting what all the fuss is about statistically. For decades, the African consumer has been dormant, struggling to survive. Now, from Lusaka to Abuja, demand for commercial property developments and new shopping precincts can no longer be ignored. The African consumer is coming of age both in numbers and in spending power capacity.

Some 40 percent of Africans now live in urban areas, a figure that approximates that of China. Suddenly, the vision of poor Africans barely eking out a dollar-a-day living is shifting. For the first time, some 130 million Africans are going to enjoy a discretionary income to spend on goods and services beyond the bare essentials. McKinsey suggests that middle-income earners in Africa have now exceeded the numbers of their Indian counterparts. It predicts consumer spending will reach $1.4 trillion in 2020, from about $860 billion in 2008.[15] African absolute growth in consumption is now greater than in India or Brazil. Add the fact that half of the continent’s population is under the age of 24 and you can see that they are likely to create huge purchasing demands in future.

Africa’s gdp per capita stands at $1 630 in 2010; by 2015 this will have increased to $2 200 at a real annual growth rate of 5.7 percent. This increase in gdp per capita will result in a 30 percent rise in the continent’s spending power. Take a projected future middle class of some half a billion people, together with almost a billion to be added in population growth over the next 40 years, and you have a fine recipe for consumer growth.

If these trends aren’t enough, then look at the creation of wealth in the new expanding urban centres. In the next decade alone, Africa’s top 18 cities will have a spending power of some $1.3 trillion. Africa now has 52 cities with more than a million residents in each, more than double the number in 1990 and equivalent to Western Europe today. Private final consumption in Africa’s ten largest economies will more than double – from around $730 billion today to over $1.5 trillion – in the next five years alone.

An agricultural revolution

Foreign investment in Africa clearly has a positive effect on the corporate bottom-line and it will also extend affordable services to millions who had little chance of access before. But there is another much more dangerous trend that Africa has yet to acknowledge adequately.

A key global trend has been the growth of middle classes across the developing world (outside of Africa) and the demands on agriculture or food security for these millions. With limited arable land in China or Saudi Arabia, for example, these and other countries are looking to African agriculture as a panacea for their looming problems.

For years, Africa has grappled with the potential to create a ‘green revolution’. Developing high-yield crops, training experts in agricultural science, increasing government budgets for the sector and building agricultural markets have only been partially successful.

The domestic approach has had patchy success. Now the influence of foreign interest threatens to undermine this further.

Since 2007, 20 million hectares of farmland in Africa – an area as big as France’s sprawling farmland and worth $20–30 billion – have already been quietly handed over to capital-exporting countries such as Saudi Arabia, Kuwait and China. They buy or lease millions of acres to grow staple crops or biofuels and ship them home. The countries doing the selling are some of the world’s poorest and least stable, including Sudan, Ethiopia and Congo[16].

Although exact figures are often in dispute, reports suggest that up to 50 million hectares of land – more than double the size of the United Kingdom – have been acquired or are currently in the process of being negotiated by foreign governments and wealthy investors working with state subsidies[17].

What is significant about these deals is their scale. In Sudan alone, South Korea has signed deals for 690 000 hectares, the United Arab Emirates for 400 000 hectares, and Egypt has secured a similar deal to grow wheat. An official in Sudan says his country will set aside for Arab governments roughly a fifth of the cultivated land in Africa’s largest country, traditionally known as the breadbasket of the Arab world[18].

It is not just Gulf States that are buying up farms. China secured the right to grow palm oil for biofuel on 2.8 million hectares of Congo, which would be the world’s largest palm-oil plantation. It is negotiating to grow biofuels on two million hectares in Zambia, a country where Chinese farms are said to produce a quarter of the eggs sold in the capital, Lusaka.

As food security becomes more critical, expect nations with deep pockets and parallel sovereign funds to be signing deals. Unless African leaders leverage their land and enter into mutually beneficial agreements, this trend is likely to cause long-term economic damage to the continent.

Estimates for 2010 indicate that almost a million Chinese farm labourers are already working on African soil. With a reluctance to utilise local labour, Chinese firms aren’t only denying Africans a job, but these land deals are being kept ‘in-house’ with any skills transfer from the Chinese to Africans somewhat unlikely.

A second trend is that foreign buyers are reducing the supply of arable land for domestic farmers. In the Gambella region of Ethiopia, Indian companies have been on a spending spree. As a result, displaced locals now find themselves without any recourse to land and seem destined, if they are lucky, simply to work for the foreign entity. In the Sudan, communal lands are under attack from commodity traders. The size and importance of these transactions can lead to state fragmentation, while dispossession can contribute to sustained domestic political strife.

We can therefore expect to see a divisive edge to foreign land acquisition on the continent. As food security becomes a household concern – just as global warming has become – then a multitude of foreign players will be seeking out additional tracts of land. A key trend for Africa will be the interest shown by international agri-business, investment banks, hedge funds, commodity traders as well as pension funds, foundations and powerful individuals keen to secure the potential of an attractive rate of return. Farmland in Africa is giving a 25 percent return a year – pretty attractive for any fund strategist or investor seeking a return in a tight rates environment.

Of course, Africa can benefit if technology used by foreign companies to increase crop yields can be employed beyond the foreign-owned land for domestic food production. This will be crucial in avoiding the destruction of domestic farming at the expense of foreign land deals. Similarly, the displacement of existing farmers will need to be addressed through providing adequate compensation from the state. Together with the much-vaunted state spending on agri-business in general, can Africa take these trends, as threatening as they are, and perhaps develop a positive outcome?

Infrastructure development

If there are question marks about Africa’s ability to really leverage its exceptional landmass to feed its people and others, there remain similar doubts about its ability to satisfy the demands of its citizenry through adequate infrastructure spend. Again, higher economic growth rates mask the often perilous state of such basics as access to potable water and sanitation.

We noted earlier that African consumers will have more to spend. They will also demand more from their governments. African cities that are currently bursting at the seams due to mass migration from rural areas will not only house wealthier inhabitants, but their own crumbling or non-existent infrastructure will also need massive overhauling. Expect a huge increase in infrastructure spend across the continent, which in turn is likely to attract even more people from rural areas. Together with consumer-oriented industries, agriculture, resources and infrastructure together could generate as much as $2.6 trillion in revenue annually by 2020, or $1 trillion more than today[19].

For decades, Africans have been hamstrung by inadequate or non-existent fixed-line telecommunications. It is perhaps in this sector that the domestic populace are now seeing – and will see – the greatest positive change to their lives. Communications are the mainstay of any society and a key driver of economic growth.

In the last decade alone, more than 316 million subscribers have been signed up by cellular companies across the continent. The number of users is now at least 400 million. The replacement of unreliable fixed-line and state-run telecommunications companies has been critical to an African coming of age. Telecom revenues on the continent have increased at a compound annual growth rate of 40 percent – unmatched by most other industries. Spending on it and communications technology in Africa will more than triple to $150 billion by 2015. Given population increases and further urbanisation, this aspect of infrastructure improvement is likely to continue unabated.

The real trend here is the replacement of state-run infrastructure by private companies or public–private partnerships. A critical way for Africa to overcome the gross inefficiencies of state-run enterprises of the past will be continued outsourcing or partnership routes. Although the state will play a heavy hand in such enterprises and collusion will keep pricing structures high, the benefits will still drive the continent. Private companies will need to hone their relationships with government or city authorities as these partnerships take root. Controversially, this may necessitate a very flexible and pragmatic relationship with political leadership at local or regional level to ensure access to consumers and planning permits.

For the foreseeable future, the continent will need approximately $95 billion per year to speed up its deficient power, transport, waste and irrigation services. Again, the tardy state of much of these essential services will lead to a massive rollout over the next few decades. Infrastructure spend will potentially be akin to a gold rush; all that is holding back its efficient implementation are capacity constraints and governance issues, which are not insurmountable problems for direct foreign ownership of infrastructure such as in the ict industry.

As noted, Africa has defied the doomsayers in the worst possible economic times. In future this will be seen as a tremendous asset and attribute for further investment as the continent derives political benefit and clout by virtue of the old adage, ‘Nothing succeeds like success.’ Investing in Africa has become the vogue for the start of the second decade of the 21st century and, ironically, investing in the mature markets of the United States or Western Europe looks a lot less attractive.

The China effect

No one quite understands Africa’s potential from both an economic and political perspective like the Chinese. Chinese diplomatic and business exposure, which has increased manifold over the last decade, looks set to be an enduring trend for the next decade and beyond. China–Africa trade has increased from $3.5 billion in 1990 to almost $100 billion in 2009 and is projected to top $350 billion by 2015[20].

Beijing certainly is not new to Africa – it has been giving aid since the 1950s – but its dramatic recent forays have left many concerned about political influence in future. No doubt, China has simply identified Africa as a market wide open for business. Although the United States and the European Union have often neglected Africa in the past, China’s approach is simply good business with foresight into an expanding economic zone. The neglect and resultant lack of foreign investment from the West has enabled Chinese companies to fill the gap.

Serge Michel and Michel Beuret’s superb account China Safari: On the trail of Beijing’s Expansion in Africa[21] assesses the extent of the Chinese presence. By 2010, there were already 900 Chinese companies active across Africa. The stated long-term goal of the Chinese authorities is to move 300 million people from China to Africa. Already more Chinese are living in Nigeria than British at the height of the Empire, while Cameroon’s Beijing Embassy processed 700 000 visa requests from Chinese citizens in 2008/2009[22].

Chinese labourers can earn five times in Africa what they can in China – $500 a month versus $100 a month. Chinese goods in Africa sell for a quarter to a fifth of what Africa’s own products sell for. Chinese farmers in Sudan growing vegetables for sale to the large Chinese population there are making ten times what they could at home. China is now also close to being the premier purveyor of small arms sales on the continent.

Critics have often argued that the Chinese were all about shoring up oil and strategic resources. While this certainly is a critical component of engagement, it is surely not the only reason for increased trade volumes.

Although the term ‘new colonialists’ is often bandied about in assessing the trends in Sino–African ties, the Chinese in large part are hardly worried about land grabs or political interference. In 2008, Chinese firms exported more than $50 billion in goods to the continent, more than France, the United Kingdom or the United States. The largest and fastest-growing sector was not textiles and the cheap consumer goods we often hear about, but construction equipment and machinery[23].

Far from these deals being heavily subsidised from the Chinese side, which could create dependency, African financial institutions such as the African Development Bank play the defining role in securing finance. These trends are important in assessing the manner and style in which China has identified Africa’s growth potential. Hard-nosed business deals exporting Chinese-made capital goods will be critical to the advancement of the continent. And it is only the tardiness of Western counterparts who have failed to muscle in that makes the Chinese look as though they have a different agenda.

China’s single largest direct investment in Africa so far is certainly not a strategic oil or mineral concession or mine acquisition. Instead, the country has understood the future importance of banking to a continent growing rapidly. In 2007 the Industrial & Commercial Bank of China purchased 20 percent of South Africa’s Standard Bank for about $5 billion.

Ironically, it has been the West whose interaction with Africa in the past has been confined largely to strategic political and commodity partnerships, often with very dubious regimes. Zaire’s dictator, Mobuto SeseSeko, stands out as a pivotal example. However, it would be similarly naive to expect Chinese economic ties not to embody a political element. With 53 countries on the continent, there are 53 important United Nations votes waiting for a Chinese-sponsored initiative to secure support. By establishing well-financed diplomatic missions in just about all countries (with a few notable exceptions, some of which still recognise Taiwan), China has bolstered its high-level diplomatic forays alongside the economic.

So, while continued – and expanded – Chinese trade is likely to be with us for some time to come (and as long as the country can continue to grow at anywhere between 8 and 10 percent a year), so will its political influence. The size of the deals and linkages between Chinese companies, the Chinese Communist Party and African governments adds a political dimension to trade. And for African leaders who have still not made the transition to democracy or a human rights culture, trade with the Chinese comes with little conditionality in this regard. A recurring theme of China’s engagement with less-than-savoury developing world governments is its lack of innate commitment to pressurise for democratic reforms or domestic accountability in governance – as seen repeatedly in relations with Zimbabwe.

Does this present another side to the optimism of trade? In a sense, yes. On the one hand, a key trend is the way China is helping Africa build infrastructure in genuine business deals that are beneficial to Africa. Yet at the same time China clearly is filling the void created by the West – not just economically but also politically.

Perhaps the real trend that China brings to Africa, apart from enhanced trade figures, is its own ability to take millions of people out of poverty over the last 20 years – without caving in to democratic change. The authoritarian nature of the Chinese political model may well be attractive to African governments not keen to embrace democratic reforms. And the linkages between the Chinese Communist Party and ‘private companies’ can be very appealing to Africa’s political parties keen to shore up their own finances through lucrative state-sponsored deals. Expect the Chinese model to prove increasingly attractive to less-than-democratic African heads of state and political parties.

Most importantly, African heads of state are likely to vastly prefer the Chinese for their lack of sanctimonious preaching – often characteristic of the West. Doing business with China will be easier and less bound by accountability issues but, as we suggested earlier, the sting in the tail is diplomatic or political favours that the Chinese may call in when confrontation looms with the United States or Western nations.

Economic growth alone is not enough

Economists are producing glowing reports of economic growth in Africa – statistically a very real trend for the foreseeable future and the focus of this chapter. These must, however, be tempered with a question about whether the current statistical growth pattern will set a trend for the real improvement of life conditions for the 1.4 billion Africans by 2030. Africa will need to do the basics right and not just trade (through elite-driven government sector finance projects) or building prestige infrastructure projects that similarly benefit the elite but offer little to the poor.

Firstly, societies that will succeed in future will still need to innovate. This can only be done through improving educational opportunities and encouraging skills retention. Secondly, African countries will need to produce goods that are in demand globally. Production can only occur in an enabling environment where red-tape, corruption and impediments to social growth (human development aspects) can be brought under control and in line with best practice and globally competitive standards. Once these standards are met, real trade can springboard millions out of poverty.

Countries that get these basics right will be the winners in the Africa of the future, but expect a very patchy outcome. From a purely business perspective, the demand for goods and services is palpable and growing. Yes, invest in Africa and the projected demand from the public and private sector should bring substantial rewards. But from a governance point of view, a lack of transparency and continuation of elite-sponsored business agreements (often with foreign companies and firms keen to do business at any cost) can continue to prevent Africa from reaching its true potential.

Africa is still perceived far too negatively in Washington and London, and it is not as if issues of hiv/Aids, poverty, corruption and ethnic/political conflicts will disappear any time soon. A massive 66 percent of the continent’s long-suffering 160 million destitute people still live in slums, but on most social development indicators the continent is showing substantial progress in uplifting the poor. In contrast, Beijing, Delhi and Brasilia clearly see the potential and are acting on this with their pocketbooks.

Although there is a long way to go in terms of rolling out democratic accountability, substantial strides have been made in key social indicators. This bodes well for Africa. For business less concerned about governance issues, the continent is wide open for a plethora of commercial opportunities. This trend is clear and barring a ‘black swan’ series of incidents, looks set to spur on the continent.

As unscrupulous African leaders grasp the leverage of the discoveries of new oil fields or value of the agricultural land to foreign investors, however, less-than-savoury leadership can again turn towards new and more sophisticated elite-sponsored deals with foreign entities, preventing real benefits from filtering down to Africa’s people.

Africa therefore stands on the cusp of a critical opportunity. If it can grasp its own global importance in an era of unique opportunity and simultaneously understand the need for a lesser role of its political elites in favour of spending on its people, it can start to really provide rather than squander its resource leverage. The continent is well positioned in a world less dominated by the West and more open to input and influence from the developing world. The quest for scarce commodities has tied the African continent to the needs of major economic players more than ever before. As the economic recession leaves an enduring mark on the spending habits of those in Boston, Bordeaux and Birmingham, so global corporates will increasingly look to add profit from exposure to new markets – thus making Africa so attractive.

The real trend, therefore, is a continent with great potential, operating in a changed era of global conditions when it should have its best shot at success, but still with a leadership corps uncertain whether it can grasp the future or put it in its back pocket.

[1]African Futures 2050, Institute for Strategic Studies Monograph 175, January 2011

[2]African Futures 2050, Institute for Strategic Studies Monograph 175, January 2011

[3]BRIC and Africa, Standard Bank Economics Brief, 23 November 2010

[4]African Futures 2050, Institute for Strategic Studies Monograph 175, January 2011

[5]Lions on the Move: The Progress and Potential of African Economies, McKinsey Global Institute, June 2010

[6]International Monetary Fund 2010

[7]World Factbook, CIA 2010

[8]http://online.wsj.com/article/SB10001424052748704720804576009672053184168.html

[9]BRIC and Africa, Standard Bank Economics Brief, 23 November 2010

[10]BRIC and Africa, Standard Bank Economics Brief, 23 November 2010

[11]Vijay Mahajan, Africa Rising, Wharton School Publishing 2009

[12]World Bank Statistics: http://data.worldbank.org/

[13]http://online.wsj.com/article/SB10001424052748704720804576009672053184168.html

[14]http://money.cnn.com/2010/11/30/news/companies/Walmart-Africa-expansion.fortune/index.htm

[15]Lions on the Move: The Progress and Potential of African Economies, McKinsey Global Institute, June 2010

[16]Cornering Foreign Fields, in The Economist, 21 May 2009

[17]Food, Water Driving 21st Century African Land Grab, in Mail & Guardian, 7 March 2010

[18]Outsourcing’s Third Wave, in The Economist, 21 May 2009

[19]www.tomorrowtoday.co.za

[20]BRIC and Africa, Standard Bank Economics Brief, 23 November 2010

[21]Serge Michel and Michel Beuret, China Safari: On the Trail of Beijing’s Expansion in Africa, Nation Books 2009

[22]http://www.chinatalkingpoints.com/richard-behar-on-chinas-march-into-africa/

[23]Deborah Bräutigam, China in Africa – Think Again, in The European Financial Review, 16 August 2010