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Roads to African Economic Development


Sub-Saharan Africa is positioned for significant economic growth in the future.

Admittedly, right now, it has the lowest economic indicators of any other region in the world. It has the lowest GDP per capita, the lowest educational attainment statistics and the lowest human development indicators.

However, economic development is happening all over the world. It is happening in Africa too. In 2000, Sub-Saharan Africa had a GDP per capita of $2,108. (in constant dollars using purchasing parity prices.). In 2022, the last year for which data are available, the GDP per capita was $4,435. Average African income has more than doubled since the end of the 1990’s. Having income more than double is a big deal, a very big deal.

Note that a lot of that accrues to people at the top. A small set of people at the top of government or the top of the major firms get incredibly rich. The middle class grows as the super-rich need skilled employees to do what needs to be done. Standards of living for the poor grow more slowly. However, poverty levels are declining in Sub-Saharan Africa. In 2000, 78% of all Sub-Saharan Africans earned less than $3.65 a day. Imagine trying to survive on $3.65 a day, never mind less than that. In 2019, the last year for which data is available, after adjusting for inflation, only 64% of Sub-Saharan Africans were earning less than $3.65 a day. This is still a lot, but it does mean that nearly 15% of the population was able to move out of poverty in this period. That 15% did not necessarily attain comfortable middle class incomes. But they were significantly better off.

Economic development reduces poverty faster if the proceeds of development accrue to all social classes rather than concentrating at the top. But unequal development is better than no development. The rise of a new middle class and upper class does lead to more employment for everybody else. The rich buy cars that need fixing. They go out to restaurants which need cooks and waiters. They hire domestic servants; they hire security guards. They send their kids to private schools – creating opportunities for well-educated school teachers. Economic growth produces more economic growth. Some of that comes in the form of the expenditures of the nouveau riche.

What is driving the growth that is creating this new upper class?

For a long time, Africa has been a powerful agricultural producer.

Think about how much of the world’s coffee comes from Africa. Think about how much of the world’s cacao comes from Africa.

Africa has always been a strong mineral producer. Most people only think about the diamonds of South Africa. However, much of Africa has rare minerals. Furthermore, Africa is a critical global supplier of plain old copper.

The mines are very much a mixed blessing. They are generally associated with civil war, which is not at all associated with economic growth. Warlords, criminal gangs and regional separatists like to control mines, so they can pay for weaponry with minerals. This means they are very willing to go to war to get control of mines. Areas that are particularly well endowed with minerals such as the Eastern Congo, have seen non-stop civil wars and violence against the general public. Private armies financed by outside nations complicate the picture even further. The mineral interests in capital cities still make money; the regions where the mines are located are often chaotic.

African manufacture tends to get underestimated. I personally expect that Sub-Saharan Africa will be particularly important in global manufacturing in the next twenty years. The cheapest labor in the world is in Sub-Saharan Africa. East Asia demonstrated that cheap labor can produce massive cost advantages in international manufacturing. Sub-Saharan Africa has workers who will work at wages far below those of East Asia.

Some industries, however, already have the elements in place to make their big move. There has long been a tradition of artisanal clothing making in Africa – with both men and women wearing bright colorful distinctive clothing. It is not much of a step up to move from widely available colorful clothing to international fashion design. There already are a lot of successful African fashion houses out there. I invite the reader to Google “Fashion designer” and then name an African country. For most African nations, all sorts of names of designers will come up. Take a look at the clothing yourself and ask if these could be sold to the movie stars, pop musicians and glitterati of the world.

Services are a non-trivial option. Africa is already really strong in entertainment. Most countries have large communities of very skilled musicians who do rap, dance, traditional, electronica and all sorts of advanced avant-garde forms. Gospel music in Africa is totally impressive.

Nearly every African nation has a film industry which includes both state-financed big budget films and small hand-held independent productions. A phone, some friends, some martial arts action and some jokes and you have a movie – often a good one. Nollywood in Nigeria is the most famous film complex. However, my own personal vote is for Wakaliwood in Uganda. If you have never seen any movies by Nabwana I. G. G. (Issac Godfrey Geoffrey) you owe it to yourself to see at least one. He makes movies in the slums of Kampala with local adults and kids that are some of the most entertaining action comedies ever.

No one thinks of Africa as being a finance center; however, it does not take much to create a tax haven. Countries with robust agricultural exports (the Ivory Coast with cacao) or diversified manufacturing and mining prospects (South Africa) already generate a lot of internal profits. When you have money, you can have finance.

Construction is a major staple of African economic growth. All you need for a construction industry to succeed is population growth, migration or both. A larger population and increased migration to cities means that housing and business buildings will need to be built to cover for the new residents of the receiving destination. Yes, many African migrants – notably those from the countryside to big cities – will end up in slums. They will often have to construct their own houses themselves out of plywood or cinder blocks. Even in these cases, the migration creates more work for plywood and cinder block makers. More affluent populations or migrants that succeed create a demand for more permanent and nicer facilities that would be built by construction firms, rather than by poor people themselves. Construction is labor intensive and hires a lot of people. The supplies construction companies need, such as cement, or drywall, are often produced locally. Construction booms create a lot of employment and a lot of wealth.

Tourism is another significant source of growth. Whether or not Westerners will spring for African tourism is an open question. The continent offers some of the best beaches in the world, some of the best music in the world and amazing food. Regardless of whether Westerners decide to visit Africa or not, there is gigantic potential for within-Africa tourism, where the African middle and upper classes purchase beach vacations and nights on the town. This suggests tremendous potential for coastal villages – particularly ones that might be newly accessible as the African road network steadily expands.

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This is not to say that Africa does not have problems.

African education is improving much the way that African economies are improving. While there are now cadres of sophisticated university graduates in every African nation – and literacy rates are steadily increasing, there still remains a lot of work to be done.

Political instability is a major issue. Gregory Hooks once said that war is development in reverse. The political crises, regional insurrections and warlordism of some African nations has had devastating effects on quality of life and economic prospects. However, there are plenty of African nations that are essentially stable. South Africa has seen no major wars since the end of apartheid. Most of the African island nations, such as the Cape Verde Islands and Mauritius, are not only stable but quite wealthy. (Madagascar not so much.) Countries like the Ivory Coast and Ghana are mostly stable, although there have been significant exceptions.

Overall, while Africa is poor, it is not as bad off or unsavable as some people’s stereotypes would lead them to believe. Economic growth is occurring in Africa. Poverty reduction is occurring in Africa.

The Congo is unlikely to become as wealthy as Sweden within a decade. But economic development is a slow process. There are enough industries that are viable and promising in Sub-Saharan Africa, that there are significant prospects of very real improvement in the next twenty years.

Not everything in the world is getting worse.

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