World Economy

Is Africa the new Asia?

01 Feb 2011

"I am sure if you ask Ethiopians whether they would prefer their current double-digit economic growth, and having every chance of meeting the Millennium Development Goals, or having no chance through a policy of economic isolation, the answer will be a resounding one."

Often, poverty, dependency and underdevelopment are the main prisms through which sub-Saharan Africa is seen by the world’s richest citizens, who variously call themselves “the West” (despite the location of Japan, Australia and New Zealand) and “the North” (despite the fact that there are more citizens in developing countries north of the equator than south). Hence, the announcement yesterday that Southern Sudan would secede from Sudan after a referendum on the issue is refreshing, not only because it brings to an end one of the world’s longest running civil wars because also it makes people think – however briefly – of new starts and optimism, when they think of Africa.

The switch away from a narrative of dependence also allows us to look at sub-Saharan Africa’s economic prospects. Most of us in the West/North have been quite wrapped up in our own bubble (and its bursting) the last twenty years or so. Economists refer to the period from the mid-1980s to 2007 as the “Great Moderation”, with by and large low and stable inflation and high economic growth. This is contrasted to the turbulence of the 1970s and early 1980s, and a new wave of issues since 2007.

In sub-Saharan Africa, however, the picture is very different. The 1980s and 1990s were decades to forget. In current dollar terms, the sub-Saharan economy was about $730 billion in size in 1980, $930 billion by 1991 and $1,150 billion by 2001. While this average annual growth of just over 2% might sound healthy enough, population was growing at close to 3% a year. This means that throughout the 1980s and 1990s, living standards were falling on average in sub-Saharan Africa. Given the huge impact of HIV, which has reduced life expectancy by one third in some countries, and the ongoing impact of malaria, which is estimated to slow growth by 1.3% a year, this is an unsurprising fact.

However, since 2000, economic growth in Africa has more than doubled in speed. The region grew in real terms by an average of 6.1% each year between 2001 and 2008 and is expected by the IMF to grow by 5.9% a year between 2008 and 2015, in effect largely shrugging off most of the effects of the apparently global financial crisis. At the same time, population growth is slowing: it is currently 2.3% and is expected to average 1.4% over the next forty years. This means, for at least the first time in a generation, real living standards are improving and noticeably so (6% economic growth over 2% population growth). All the talk may be of China and India having become the drivers of global economic growth since 2000, but that may miss an every more exciting story in Africa.

Economic growth in sub-Saharan Africa, 2001-2015

Economic growth in sub-Saharan Africa, 2001-2015

The map above shows average annual growth across sub-Saharan Africa across the pre- and post-2001 periods. (The full visualisation is here.) Larger countries are by and large growing faster, a reflection of a combination of bigger consumer markets and typically greater resources. Using physical resources for economic growth can only be a temporary strategy (they’ll run out one day) and does leave an economy more open to external shocks, if the price fluctuates. But the lesson of countries like Norway is that natural endowments can be harnessed to build long-term prosperity. I am sure if you ask Ethiopians whether they would prefer their current double-digit economic growth, and having every chance of meeting the Millennium Development Goals and developing industrial and service sectors, or having no chance through a policy of economic isolation, the answer will be a resounding one.

It’s not all resources, either. At least some of the economic growth that Africa is seeing may be down to what could be regarded as a luxury: mobile phones. There are ten times as many mobile phones as landlines in sub-Saharan Africa, and almost two in three people in the region has access to one. As a forthcoming article in the Journal of Economic Perspectives outlines, mobile phones are not a “silver bullet”, but they do offer a range of benefits that could be missed at first sight. These phones don’t just connect individuals, they connect individuals to information and markets, for example, corn and tomato farmers can find out today’s prices. They also connect individuals to services, from reminder text messages for those on AIDS medication to mobile phone credit as a form of currency in parts of Africa without more traditional banking services.

None of this is to diminish the scale of Africa’s challenge. Poverty, malaria and HIV continue to mean that standards of living for many are worse than their ancestors’, something that jars with any sense of progress. Perhaps, though, that story was the story of the twentieth century. During the 1990s, six of the world’s fifty fastest growing economies were in sub-Saharan Africa. Currently, one in three of the world’s fastest growing economies is African – from Malawi and Mozambique in the south-east to Ghana, Sierra Leone and the Gambia in the north-west. Maybe, the narrative is changing.

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2 Comments

  1. Michelle said on February 4, 2011 | Permalink

    Economic growth for this wronged continent is long overdue, however two things concern me here. Firstly, who is responsible for this economic growth – Are Africans involved in this or is it part of the Chinese strategy to gain control of all of the resources in Africa? Secondly is whether these countries can keep corruption out of their political systems to provide a stable platform for consistent growth.. Then again, has any country ever achieved a political system without corruption??? Hmm… whole new can of worms…

    Nice good-news post Ronan, maybe the world is not so damned.

  2. Ronan Lyons said on February 8, 2011 | Permalink

    Concern, an Irish development agency, are actually working in this area in their program countries:
    http://www.concern.net/news-blogs/concern-blog/food-aid-mobile-phone

One Trackback

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