By Donald Kaberuka & Mimi Alemayehou*
50 Africa leaders convene in Washington for a historic meeting with President Obama this week. Pedestrians and motorists caught up in the inevitable traffic jams around the White House may well be asking how far they have got, and where they are heading.
CEOs, Economists, Development Leaders, Congressmen, and Policymakers will be asking a more profound version of the question, and relating it to Africa. Beyond the polemical question as to whether or not Africa is rising – itself an oversimplification of a complex reality – the issue will be how far has Africa’s political economy truly progressed?
The answer they receive will surely surprise and excite.
For the past two decades, the BRICS nations – Brazil, Russia, India, China and South Africa – have dominated the discussion of the emerging markets. Meanwhile, the African continent has been building a track record of reform and growth, along with an increasingly plausible scenario for transformation.
The facts are indisputable.
Despite the global slowdown, most of Africa has posted a blistering GDP growth rate over 5 percent for the past decade. Over a dozen countries, including Ethiopia, have performed well above 7%. The continent as a whole has stabilized its macroeconomic management, kept inflation in single digits, pushed forward long-overdue investment climate reforms, and worked hard at improving its infrastructure and building its institutions.
For generations, Foreign Direct Investment was targeted toward reaping the bounty of Africa’s mineral and natural resources. Now, FDI trends have changed in two important respects. The share of inward FDI into consumer-related greenfield ventures – such as financial services, retail stores, food and beverage industries, telecommunications, and motor vehicles – has more than tripled since 2006.
Just as important, outward flows of FDI from Africa are on the rise, meaning that homegrown companies are gaining the scale and stature to tap into regional markets and supply chains. Almost unnoticed, Africa’s GDP has come to equal that of Russia or Brazil, and will top $2.5 trillion by the end of this decade.
Over the next four decades, Africa (already the second largest global population, and the youngest), will have the distinction of adding more people to the planet than any other region in the world, while other regions watch their share decrease.
Consumer spending in Africa will be an estimated $1.4 trillion within five to six years.
Add all these factors together, and African leaders have good reason to arrive in Washington both eyeing and expecting investment deals. As a group, these leaders are far more interested in the pragmatic mechanics of fostering equity funds and integrating corporate supply chains than in the prospects of a new aid package.
Their work is not done, of course. Not by a long stretch.
To begin with, Africa still has to contend with a residual skepticism. We are regularly treated to a sort of counter narrative. “Africa is not a country; there is growth but limited transformation; few jobs are being created, and inequalities have widened. Africa is being carried by a handful of larger economies, such as South Africa, Nigeria and Kenya, as well as a handful of smaller stars, like Mozambique, Angola, Ethiopia, Zambia, Rwanda and Senegal.
Intra-regional trade levels are low at 12 percent, while some 600 million Africans still live off-the electricity grid.”
It’s true: despite progress in investment climate reforms, antiquated licensing and regulatory systems, patchy land titling systems, as well as gaps in trade-related infrastructure, all combine to a place a drag on entrepreneurship, market expansion, competitiveness, job creation and transformation.
One could credibly argue that the overlooked news story is not that Africa’s economy has performed so well, but that so few have realized how easily much faster growth might have been obtained with only modest changes. Just imagine that – with better infrastructure both hard and soft, and with greater trade facilitation – economic growth would be higher than 7%.
Casual observers often think of Africa through the shorthand of the postcolonial turbulent journey, the conflicts, and the scourge of HIV or – in a finer light – the inspiring examples of Nelson Mandela and Ellen Johnson Sirleaf.
Less visible is the patient and prosaic resolve, in nation after nation, of leaders in the public and private sectors who have been battling poor infrastructure and red-taped bureaucracies, challenging entrenched croneyism and demanding responsible engagement from investors in local issues.
They do so because they believe that the promise their economies hold beyond the horizon – a promise based on broad, entrepreneurial, domestic growth – is more than worth the short term problems, structural challenges and risks they face today.
So we fully understand that in Washington many Africans and Americans will be asking the question: “how far is there still to go?”
But few if any of them will need to ask whether we are headed in the right direction. When the Summit ends and motorists breathe a sigh of relief, one thing is for sure: African leaders and business people will be as determined to change the familiar narrative about their continent, from one of misery and despair, to that of opportunity, partnership for growth, trade and investment.
America will have to take this in: a prosperous Africa is a force for good in the unfolding global landscape.
*Donald Kaberuka is President of the African Development Bank, and Mimi Alemayehou is Executive Vice-President of the Overseas Private Investment Corporation