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Old July 26th, 2010, 10:15 PM   #1
Matthias Offodile
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Africa's Biggest Score: A Thriving Economy

Africa's Biggest Score: A Thriving Economy


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In addition to the World Cup, Africa is home to some of the world's fastest-growing economies. Businessweek.com's Frank Aquila explains their ascent

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by By Frank Aquila
updated 6/29/2010 8:00:00 PM ET


Was Ghana's extended-time victory over the U.S. in the World Cup elimination round on June 26 a precursor of what is to come in the broader global economy?

Almost unnoticed, signs of economic life have begun to stir in that most unlikely of places -- Africa. Despite its riches in natural resources and geographic proximity to Europe, Africa has been a perennial laggard on the global economic scene. Mention the phrase "emerging economies," and most people rightly think of Asia and Latin America. Few look to Africa as an economy of the future.

That view might be changing. As then U.N. Secretary General Kofi Annan declared in 1999, "Africa's profitability is one of the best-kept secrets in today's world economy."

To be clear, Africa faces many daunting political and economic challenges. Parts of the continent continue to struggle with an AIDS epidemic or sectarian strife. But in the same way that we easily distinguish between Germany and Greece when we think of the European market, we must also understand that Africa is a vast continent with numerous religious, ethnic, and cultural differences. Those differences often divide the continent and restrict economic cooperation, but some of those differences can also be the basis for dynamic economic development.

A quick look at some statistics might be surprising. According to a report by consulting firm McKinsey, Africa had a compound annual economic growth rate of 4.9 percent from 2000 to 2008. While that's not as robust as the 8.3 percent pace in emerging Asia during the period, it actually exceeded the growth of both Latin America and Central and Eastern Europe. Even Sub-Saharan Africa, the poorest region of the poorest continent, had average GDP growth of 4.8 percent between 2004 and 2008. While the global economy shrank in 2008, the African economy still managed to grow another 2 percent, and growth rates this year are almost back to 5 percent.

The Boston Consulting Group has coined the term "African Lions", to refer to Africa's strongest economies: Algeria, Botswana, Egypt, Libya, Mauritius, Morocco, South Africa, and Tunisia. What is most stunning about the African Lions is that their average per capita GDP of $10,000 actually exceeds the combined per capita GDP of the so-called BRIC nations -- Brazil, Russia, India, and China -- of $8,000. While averages such as these mask many anomalies, and certainly the African Lions are far behind the BRIC nations on almost all broad indices, the number is nevertheless startling and encouraging.

One might guess that rising prices of commodities, particularly petroleum, account for much of the recent increase in African economic growth. While commodities are an important contributing factor, the McKinsey report indicates that their price increases account for only about a quarter of this decade's economic growth in Africa.

While we in the U.S. and Western Europe might be surprised by the economic development in Africa, it probably comes as no surprise to business and political leaders in China and India, which are rapidly developing countries themselves. Looking for oil and other natural resources, both China and India took a keen interest in Africa as far back as the late 1980s. With 16 billion metric tons of proven oil reserves and 500 trillion cubic feet of gas reserves, Africa can be energy self-sufficient while it exports energy to fund further growth. China and India have found a warm welcome for their investments.

Not only did the Chinese government make direct financial investments in the region; it also provided educational, health, and cultural support, as well as military aid, to a number of governments
. China's investments have indeed paid enviable returns; it has been estimated that Chinese trade with Africa could exceed US$100 billion this year. Indian corporations from a range of industries have also established significant operations throughout the continent. As the world seeks both natural resources and economic growth, the Chinese and Indians will certainly enjoy their early-mover status but will no doubt experience far greater competition from their rivals in Europe and the Americas.

While foreign direct investment from China, India, and elsewhere are key factors in Africa's economic growth, local entrepreneurs can rightfully claim at least part of the credit for recent success. Vijay Mahajan, author of Africa Rising: How 900 Million Consumers Offer More Than You Think, sees emerging entrepreneurship as a crucial ingredient of African success. Mahajan believes the poor and emerging middle class in Africa are key drivers behind the economic expansion. These groups seek improved living conditions and a more comfortable life. This leads them to form small businesses as they begin to consume a whole range of products, from cosmetics to cell phones, that were out of their reach just a few years ago.

Mahajan even points to the Nigerian film industry, often dubbed Nollywood, which produces more films annually than either the U.S. or India, as a sign of homegrown development. While these Nollywood productions are low budget films by any measure, it does point to a media business not often associated with the African continent.

So how did Africa manage finally to move forward and begin to achieve significant rates of economic growth? While Darfur and other conflicts continue, the past decade has actually been a period of relative stability across most of the continent. Governments from north to south have improved, leaving politically unstable countries, such as Zimbabwe, as the exception rather than the rule. In speaking of the development model that has allowed their African Lions to achieve significant economic success, Boston Consulting Group points to a few key factors: "political stability, rule of law, property rights, access to capital, and public investment in education, health, and social services."

To be sure, most Africans continue to live in poverty, and 60 percent still engage in agriculture as their primary source of income. There are and will be many challenges ahead, but along with those will come high rates of return and growth opportunities for those who choose to invest.

As Nelson Mandela once noted, the "greatest glory in living lies not in falling, but in rising every time we fall." Africa has had its share of falls over the centuries, some imposed by colonial powers while others have been self-inflicted, but today we see a continent that does indeed rise after every fall. So when World Cup fans depart Cape Town after the final match and the buzzing sound of the vuvuzela mercifully fades from memory, it is likely that the people of Africa will continue their long march to further development and growth.

http://msnbc.msn.com/id/37996960/ns/...g_businessweek
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Old July 26th, 2010, 10:42 PM   #2
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I'm amazed how China suddenly became Africa's benevolent savior.. nothing against doing business with the new world power, no one can ignore China, but what many countries have seen is short term growth fuelled by the current commodity boom, they are being stripped naked by Chinese enterprises and the workers that come with them istead of developing home grown industries that keep the money within the country.
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Old July 26th, 2010, 10:47 PM   #3
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China is not Africa's saviour.
The article also seems to be quoting the wrong people.
There should be more opinions from African business people and economists.

Last edited by slman; July 26th, 2010 at 10:53 PM.
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Old July 26th, 2010, 11:10 PM   #4
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China has done A LOT to help Africa, nobody can deny this....of course, they donīt do it for free.

but the number of new roads, highways, airports and even new cities built by Sino-African cooperation is amazing.
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Old July 26th, 2010, 11:11 PM   #5
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China has done A LOT to help Africa, nobody can deny this....of course, they donīt do it for free.

but the number of new roads, highways, airports and even new cities built by Sino-African cooperation is amazing.
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Old July 26th, 2010, 11:19 PM   #6
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And the access to mineral and energy resources is a good motivational factor for the Chinese.
I am not knocking the Chinese, for the record. I just hate depending too much on foreigners and this saviour description just encourages dependence.
Self-empowerment is vital if we are to get up to developed world standards someday in the future.

Last edited by slman; July 26th, 2010 at 11:25 PM.
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Old July 26th, 2010, 11:26 PM   #7
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The Chinese offer cheap loans with low rates for projects that no one else wants to fund. They have been a "life savior" for several countries, specially those without big natural resources.
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Old July 26th, 2010, 11:33 PM   #8
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Quote:
Originally Posted by Yoniii View Post
The Chinese offer cheap loans with low rates for projects that no one else wants to fund. They have been a "life savior" for several countries, specially those without big natural resources.
Do you believe in benevolence in international trade?
Is a low interest loan a benevolent thing?
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Old July 26th, 2010, 11:36 PM   #9
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The fact is that China's influence in Africa is a double edged knife, it's providing long needed basic infrastructure such as roads, schools, hospitals etc.

Meanwhile they bring more and more chinese people to do the work that could be done by natives, and when they hire africans the treatment given is the worst, the no political interference slogan is only a cover mask, chinese people are already lobbying for their interests across the continent, and as more contracts are awarded to chinese firms, less chance are left for the countries to explore their own natural resources.
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Old July 26th, 2010, 11:45 PM   #10
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Quote:
Originally Posted by romulo tokyo View Post
I'm amazed how China suddenly became Africa's benevolent savior.. nothing against doing business with the new world power, no one can ignore China, but what many countries have seen is short term growth fuelled by the current commodity boom, they are being stripped naked by Chinese enterprises and the workers that come with them istead of developing home grown industries that keep the money within the country.

China is not Africa's Savior in anyways. it has done nothing for free for any african nation.

China gets Oil, minerals and Africans countries get money, infrastructures .

That is called doing business.

No they are not being stripped naked by Chinese companies either. I know that Chinese have been importing labour to do what Africans labour can do and do.
Africans were not forced to trade with Chinese, they chose .

We africans know how bad and super corrupt our leaders are, But Africans are reforming their economies and industries into a market economy environment. There are local industries (Banks/Financial, Retail, construction, Telecom , Oil, Mining industries Pharmacetical etc...that are being developed thanks to the reforms and more diversified economic policies. With the business exchange minerals-for- Infrastructures, economies and industries can only be born and continue to mature because of the infrastructures .

There is no China being Africa's savior here. It called doing business. Unless you want to proove us how China is Africa's Savior.
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Old July 26th, 2010, 11:46 PM   #11
slman
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Quote:
Originally Posted by romulo tokyo View Post
The fact is that China's influence in Africa is a double edged knife, it's providing long needed basic infrastructure such as roads, schools, hospitals etc.

Meanwhile they bring more and more chinese people to do the work that could be done by natives, and when they hire africans the treatment given is the worst, the no political interference slogan is only a cover mask, chinese people are already lobbying for their interests across the continent, and as more contracts are awarded to chinese firms, less chance are left for the countries to explore their own natural resources.
Our European, Russian, Indian and American friends will make sure that scenario you described in the last paragraph never arises.
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Old July 27th, 2010, 12:10 AM   #12
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Quote:
Originally Posted by BUTEMBO21 View Post
China is not Africa's Savior in anyways. it has done nothing for free for any african nation.

China gets Oil, minerals and Africans countries get money, infrastructures .

That is called doing business.

No they are not being stripped naked by Chinese companies either. I know that Chinese have been importing labour to do what Africans labour can do and do.
Africans were not forced to trade with Chinese, they chose .

We africans know how bad and super corrupt our leaders are, But Africans are reforming their economies and industries into a market economy environment. There are local industries (Banks/Financial, Retail, construction, Telecom , Oil, Mining industries Pharmacetical etc...that are being developed thanks to the reforms and more diversified economic policies. With the business exchange minerals-for- Infrastructures, economies and industries can only be born and continue to mature because of the infrastructures .

There is no China being Africa's savior here. It called doing business. Unless you want to proove us how China is Africa's Savior.
Its time Africans DEMAND that African labour be used. We have been through this before with the Indians in East Africa.
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Old July 27th, 2010, 12:14 AM   #13
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Quote:
Originally Posted by slman View Post
Do you believe in benevolence in international trade?
Is a low interest loan a benevolent thing?
It's better than nothing, better than not see any productive development happening because some Western snobs rather send bags of rice than actually fund projects that can help a country on the long run.
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Old July 27th, 2010, 12:21 AM   #14
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Quote:
Originally Posted by Yoniii View Post
It's better than nothing, better than not see any productive development happening because some Western snobs rather send bags of rice than actually fund projects that can help a country on the long run.
I repeat I am not knocking the Chinese.
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Old July 27th, 2010, 12:21 AM   #15
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Quote:
Originally Posted by BUTEMBO21 View Post
China is not Africa's Savior in anyways. it has done nothing for free for any african nation.

China gets Oil, minerals and Africans countries get money, infrastructures .
Who here expect anything from anyone for free?

China have funded many projects in Ethiopia, projects that wouldn't see the light of day without their help. One example is the 1800 MW dam that's being built thanks to China.

Oh, and last time I checked, Ethiopia doesn't export a drop of oil or any large amounts of minerals.

I am not saying that the Chinese are perfect. Countries like Angola can go for better options, because they've got oil and resources others can only dream about. But for a country like Ethiopia, the Chinese are our only alternative.
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