Opinion
Radiant Africa Preaches Capitalism
Taking a walk in the downtowns of major African cities, one can see bustling shopping malls and streets populated not just by domestic restaurant chains but increasingly by global brands like KFC and Walmart. Planes owned by international airlines, from countries such as China, Qatar, and Turkey, are common scenes at the airports of African cities. An increasing number of mobile phone subscribers sustain major telecommunications companies, not only of African origin, but globally-sourced ones. Capitalism is alive and well in Africa.
Some observers will worry about violence, but the truth is that today’s Africa is strong enough to avoid a protracted crisis. This is down to the growing power of the African consumer.
A decade or two ago, rash economic decisions could have brought nearly full political meltdown. But, in 2012, African consumers want to buy their groceries and get back to work. They have too much invested in the economy. It is a pattern mirrored across the continent.
Africa is quietly catching up after a period of isolation from the rest of the world between the late 1990s through 2008. Policymaking has justifiably been criticized for its multi-decade approach of ring fencing Africa. This has created an “us-versus-them” culture, which hinges on one set of development policies (trade, foreign direct investment, and capital market access) for certain countries like China, India, and Brazil, but prescribes an aid-centric policy for other, mainly African, countries.
This catalogue of policies prompted some experts to caution that many African countries were “shearing off” from the rest of the world. In part, as a consequence, though Africa is home to nearly one billion people, the continent’s share of world trade hovers around 2 percent. Meanwhile, of the roughly US1.12 trillion dollars-worth of total global foreign direct investment (FDI) in 2010, Sub-Saharan Africa received a paltry 3 percent.
However, this is about to dramatically change. Some of the inadvertent benefits from this isolation can now be seen. Africa is less exposed to the fallout from the radioactive economies of the developed world, with a the credit crisis that could take a decade to unwind. Already, many investors have been burned, entering illusory recovery trades such as sovereign bonds, emerging market equities, and big financial institutions too early.
It is against this backdrop that African economies look particularly stellar. Sub-Saharan Africa is forecasted to grow at 5.5 percent in 2012, according to recent estimates by the International Monetary Fund (IMF), nearly 4 percent higher than the anaemic growth projected in advanced economies. Most African countries have no massive leverage problem to work through. If anything, even good investment opportunities have been starved of capital.
In some African countries, banking regulation is a model for the rest of the world. While the political risk premium remains relatively high, over the past decade, real efforts have addressed many of the reasons for this – corruption, lack of transparency, and nervousness over property rights.
What is more, the story extends well beyond the well-hyped resources sector, the majority of the stocks that trade on African exchanges are non-commodity, including telecommunications, consumer goods, and financial services, where even relatively small countries have many registered foreign and domestic banks, unlike at any other time.
Investments will continue to benefit from the African demographic story, which is decidedly skewed towards the young. Over 60 percent of Africans are under 24 years of age. If well-harnessed, such statistics portend a boom in local private demand, for decades to come.
Changing dietary preferences from grain-based to protein-based foodstuffs underlies a boom for food producers.
Africa is home to many of the two billion people who have a mobile phone but no bank account. The rapid integration between financial products and mobile telephony creates myriad opportunities to directly serve the consumer and cut out the bureaucratic middlemen.
Through conversations with policymakers from around Africa, including heads of state, the perspective is clear. They see what happened in the rest of the world as a failure of governments and not a failure of capitalism.
In its true form, capitalism is thriving in Africa, dragging millions out of poverty and into the shops. It is a happy and poignant irony that the isolated continent will succeed by following the rules of the market that the rest of the world forgot.
By Dambisa Moyo
Dambisa Moyo (PhD) is an international economist. She is the author of the bestselling book, Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa. She can be followed on twitter @dambisamoyo.