Why Africa is Growing (B2-C1/v060)

Introduction

Africa’s recent growth has prompted optimism in some circles that the continent will finally be able to overcome its many decades of economic difficulties, but obstacles persist.

Script

Fareed Zakaria:  Now for our “What in the World?” segment. It’s rare enough for a U.S. president to visit Africa. This week two of them are there. President Obama of course, but also his predecessor, George W. Bush. The two visits are unrelated, but the focus is common: how to engage with the world’s fastest-growing continent?

Africa was for many decades “the Dark Continent” or “the Hopeless Continent”, as the Economist had put it. More recently, it has become the great hope of the business world. The Economist updated its take to “Africa Rising”. The World Bank recently said “Africa could be on the verge of a take-off, the like of China’s 30 years ago”.

Africa’s recent growth has been impressive and important, but let’s step back and get some perspective before we break out the champagne. First, the case for optimism: growth. As populations stagnate or even decline in Europe, Japan, and China, Africa’s  population of 1 billion is expected to more than double by 2050. More people means more consumption, more production, more growth.

African economies grew on average around six percent last year. That’s three times the pace of America’s growth and faster than many Asian countries. A new world is opening up to Africans as they get used to credit cards and mobile phones. They’re also becoming economically more free and more democratic, but there are hurdles ahead.

The World Economic Forum’s new Africa Competitiveness Report shows that of the twenty least competitive economies in the world, fourteen are African. What this means is that African economies are blighted by low productivity. African economies may be growing for now and from a very low base, but they are over-dependent on commodities.

More than half of the continent’s total exports are minerals; a focus which makes it vulnerable to fluctuations in global demand. More than two-thirds of Africa’s labor force is employed in agriculture, much of it subsistence agriculture. On the other hand, manufacturing – the hallmark of a developed economy – has essentially remained stagnant. Its share of total GDP is the same as what it used to be in the 1970s.

The African Economic Outlook published by the African Development Bank and others builds on some of these points. It turns out that if the world’s rich countries experience a one percent drop in growth, that translates into a 10 percent drop for Africa’s export earnings.

In most African countries economic and political reforms have stalled, corruption remains staggeringly high, and the private sector remains much too tied to government favors. Look at Africa’s biggest economy. As attention centers on the great Nelson Mandela’s life and legacy, South Africa itself is languishing. Annual growth fell to less than one percent in the latest quarter. Youth unemployment hovers around 50 percent, a recipe for future crises.

What to make of all these facts and reports? South Africa’s case is a warning for the rest of the continent. African countries have immense potential, but they need a continued commitment to bold reforms, transparency, free markets, and trade.

Perhaps the most crucial thing to watch is how Africa deals with its greatest resource – not oil, not minerals, but people. Africa’s share of the world’s population will rise from one-seventh to about one-fifth by the middle of this century.

If Africans get the right access to education, health care, good governance and jobs, Africa will be a powerhouse. If not, the population growth is a curse not a blessing. This week’s visits by Obama and Bush are important, but what African countries need is not so much external attention, but internal reform.

Quiz

1. Africa was for many decades “the Dark Continent” or “the Hopeless Continent”, as the Economist had ________.
2. The World Bank recently said “Africa could be on the verge of a ________, the like of China’s 30 years ago”.
3. Africa’s recent growth has been impressive and important, but let’s step back and get some perspective before we ________ the champagne.
4. Africans are becoming economically more free and more democratic, but there are ________ ahead.
5. It ________ that if the world’s rich countries experience a one percent drop in growth, that translates into a 10 percent drop for Africa’s export earnings.

Discussion

  1. Were you surprised to hear that there are a number of positive indicators for present and future growth in Africa?
  2. In your opinion, did the video provide more reasons to feel positive or concerned about Africa’s future ?
  3. Are you optimistic that Africa will overcome its development challenges for a prosperous future?

Resources