Tuesday, May 5, 2015

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Africa is Rising! At Least Its 1% Is

Africa's economy may be booming, but this will do little to help unemployment and poverty if growth is jobless and its spoils are limited to the few.
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Trickle down economics in action? A view in Luanda, Angola. Photograph by mp3ief.

What we need in Africa is balanced development. Economic success cannot be a replacement for human rights or participation, or democracy … it doesn't work…it worries us a lot when we don't see the trickle-through factor, when gain goes to the top 1% or 2%, leaving the rest behind.” – Mo Ibrahim October 15, 2012

It did not come as a surprise to many when, on October 15, the Mo Ibrahim Foundation announced that there was no winner for its annual $5 million African leadership award – for the third time since its inception in 2006. What was surprising, however, was that the foundation’s chair, British-Sudanese billionaire Mo Ibrahim, also admonished the much-celebrated recent economic ‘success’ of the African continent for largely failing to translate into better human rights and social development, and for essentially creating a few elitist winners at the top whilst the rest were left struggling at the very bottom.

Recent reports, forecasts and editorials of influential financial magazines are incredibly optimistic about Africa – its booming economic growth, its investment opportunities and its growing middle-class. Sub-Saharan African countries are reportedly among the fastest growing in the world with six out of ten world’s fastest growing economies, and recording growth rates averaging 4.9%, higher than the developing country average and much higher than the developed country average.

The Economist’s December 2011 print issue was boldly titled ‘Africa Rises’ and in August 2012, it again boldly proclaimed that ‘A Continent Goes Shopping’, underscoring the voracious purchasing power of the African middle-class to buy consumer and even luxury goods. The current received wisdom in these sleek reports, glossy magazine pages and glass-panelled conference rooms is that sub-Saharan Africa really is the place to be and to invest in, with all its abundant opportunities.

Jobless growth

This much-trumpeted economic success is mostly true, until one looks at the other side. Then questions arise over to what extent growth is spread across sectors of the economy, and whether such economic growth is translating into corresponding improvements in human and social development.

It is common knowledge that this new dawn of booming economic growth is largely the consequence of the recent rise in the global commodity prices of natural resources, chiefly oil, while the vibrancy of other sectors of the economy such as banking, telecommunications and construction trail behind in terms of growth. Many African countries primarily depend on the exportation of natural resources – and industry which is highly capital- (and technology-) intensive, providing few jobs. Only five of Africa's fifty-four countries are currently not “either producing or looking for oil”.

It is therefore no surprise that many African countries, especially the economic powerhouses of the continent, are bedevilled by high unemployment, particularly amongst young people – hovering at 25% in Egypt, 48% in South Africa and 42% in Nigeria. Thus, growth in capital-intensive sectors – such as resource exports, banking, and telecommunications – is barely trickling down to create jobs and economic opportunities for the vast majority of the people – a phenomenon commonly known as ‘jobless growth’.

Many sub-Saharan African countries experiencing record-level economic growth still have low rankings in human development indices, despite marginal improvements in education enrolment and, with countrywide variations, maternal health. This contradiction is further reinforced by the growing inequality that characterises many of such African ‘powerhouses’. Luanda in Angola (thanks to flowing petro-dollars) and N’Djamena in Chad were, respectively, the second and eighth most expensive cities to live as an expatriate in 2012 – ahead of Sydney, London and New York according to Mercer’s Cost of Living Survey. Juba in the newly independent South Sudan is also gaining notoriety for its high cost of living, while the price of select real estate in Abuja and Lagos in Nigeria reportedly rivals that of some Western cities. These expensive cities are in countries grouped within the ‘Low Human Development’ category of the United Nation’s Human Development Index based on indicators such as health, income and education.

A tale of two cities

There has certainly been some improvement – for one, there is now an identifiable middle-class in Africa with money to splash around in the cinemas of Abuja and pricey hotels of Accra, the malls and retail outlets of Johannesburg and the exclusive residential estates of Lagos and Nairobi. However, once you step out of these glitzy inner cities and look to the outskirts, the glaring contrast between the shiny modernity and the urban deprivation in the slums hits you like the searing tropical sun.

As the African middle-class goes shopping with their swelled-up wallets and designer purses in Lagos or in London, many more Africans go to bed hungry as the gap between the nouveau riche shoppers and the underclass in the urban fringes grows wider. Increasingly, it begs the question of whether this bulging middle-class is the consequence of a mass number of Africans leaving the poverty trap, as is the case in China and Brazil – both of which have seen tens of millions lifted out of poverty – or whether a previously existing middle-class in the margins was just buoyed back to vibrancy?

The task thus remains for governments to devise sustainable development strategies that are tailored specifically to suit the African context. Such strategies must sustain the momentum of economic growth while ensuring that growth spreads to and strengthens sectors such as mechanised agriculture, light manufacturing and small-scale enterprises, which have a direct impact on the lives and incomes of citizens.

Such transformational policies should ensure that revenue windfalls are utilised wisely towards social and welfare policies, which will empower millions of Africans out of poverty, thereby creating a robust middle-class rather than just enriching an already existing sliver. It also means that such funds can be saved to help with later needs, as with the Sovereign Wealth Fund embarked on by countries such as Angola and the new oil-producer Ghana.

Importantly, the African youth bulge needs to be transformed into a demographic dividend by providing employment and economic opportunities to an increasingly educated African youth and by providing critically needed infrastructure so that abundant innovative ideas, which are capable of transforming lives and societies, can materialise into reality.

Ultimately, these are still governance challenges that Africa has a long way go to overcome, but the marginal improvements in some aspects of governance, especially women’s rights, as the Mo Ibrahim Foundation’s Index has shown, gives room for some cautious optimism. Mo Ibrahim’s admonishment could not have come at a better time.

Think Africa Press welcomes inquiries regarding the republication of its articles. If you would like to republish this or any other article for re-print, syndication or educational purposes, please contact: editor@thinkafricapress.com

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I really appreciate this article. I would like to shed some light on the new middle class being created. The burgeoning middle class is really a creation of the ultra and modestly rich in Africa. These are the offsprings of the 2% who have received western education and are either being setup by their parents or have figured out a way to set themselves up with knowledge, experience received from the west and connections. This is not to say that we don't have cases of people rising out of poverty, but we can all agree that the numbers are not comensurate to the percentage of emerging middle class as the system constantly acts against the percentage of Africans below the poverty line. A lot of work has to be done for proper development to take place - raise minimum wages, create non-skilled jobs in light manufacturing as mentioned in this article, and in other areas like tourism etc This represents my opinion. follow me on twitter @in_conspicuous

this article is a sign of extreme courage for which the author should be commended . The hot air talk about "Africa rising" comes from three highly questionable trends . One , the tendancy to think , Romney-style , that a glut of millionaires means prosperity for all . This is what I would call the "extended Chinese delusion". It simply does not apply to Africa . The second mistake comes from a questionable form of political correctness ; since African massacres and human rights violations are breathily glossed over (see Somalia's abandon , remember the 4.5 millions deaths in the Congo 1996-2003 , and their contining extensions , witness the charm and elegance of Eritrea's wonderful regime , the happy democracy of Rwanda and many many more) the White Western Establishment loves to rejoice at the supposed economic miracle that is somehow supposed to compensate for this hypocrisy . And third the late globalized financial form of capitalism hates to acknowleddge its reality i.e. a total absence of commitment to anything else than short-term profit . In Africa , which is still basically a resource-based merchant adventurer economy , money can be made by the ton provided the looting short-term outlook is preserved . The Chinese have discovered the best way of doing it and they offer no apology for it since public relations and democracy are not their cup of lapsong suchong . Amusingly , today it is the West which has had to learn how to "keep face" i.e. how to lie . So it does it and people who cannot read World Bank Reports and who like to sleep soundly at night love the sound of the soft praise issued by "The Economist" . Ms Zainab Usman , please accept my heartfelt thanks and the expression of my most sincere admiration for your courage . Gerard Prunier

Such unabashedly incisive commentary. i'm from mozambique and maputo is one of those prohibitively expensive cities in the world it's so ridiculous. with such high prices you would think the services are flawless. but they are terrible, terrible, terrible! everything seems to be happening in maputo, such a tiny place. the rest of the country still has 18th century look and feel to it. xai-xai the next "big city" north of maputo -- just 2 hours drive -- is so archaic i find it hard to believe. the southern part of mozambique has the potential to produce food to feed the entire southern Africa. But what do these political plutocrats do instead of harnessing this potential? they are busy courting foreign investors for business partnerships to enrich themselves. so thumbs up to Zainab! DMM