Not hunting in the same pack, the performance of Africas economic lions.

Commentary on McKinsey Group report, Lions on the Move: The progress & potential of African economies [June 2010].
Tinacho Gerald 21 February, 2011

www.capetocongo.com

2
Commentary on McKinsey Group International report: Lions on the move: The progress and potential of African economies (June 2010).

A recent report by the McKinsey group focusing on the real and potential growth in prosperity and economic progress on the African continent is a cause for celebration. There was real growth on the continent in the first decade of the 21st century, after 40 years of general economic stagnation collectively. It is however important to immediately point out that Africa cannot be fairly assessed collectively. There are varying levels of peace, stability, hope, economic growth, social inclusion and political freedom. The progress and consistent growth of Botswana is offset by the regression and decline of a once thriving Zimbabwean economy next door. Rwanda has emerged as one of Africas great growth stories in a country with very little in the way of natural resources while the neighbouring DRC has been blighted by violence and a general lack of access to health facilities made worse by massive displacement caused by rebel activity in the east side of the country. Relatively wealthy Egypt and Tunisia have seen recent revolts against the rule of dictators while the rest of the continents dictators watch with a level of unease that has seen crackdowns around the continent, particularly in Algeria and Libya. The continent continues to be dependent on resource extraction, with oil producers such as Nigeria, Angola and Algeria acquiring over 80% of export earnings from black gold oil; while other countries bank on mineral wealth(e.g. Zambia) and the sale of cash crops (cocoa in the Ivory coast). The McKinsey report also points out diversified African economies which draw from various forms of economic activity for growth. These include South Africa, Morocco, Egypt and Tunisia where manufacturing and services account for more than 70% of official countrywide income. The report focuses on Africas biggest 31 economies that account for 97% of African GDP in 2008. These countries have had a growth rate of 7% or more (between 2000 and 2008) and their 2008 GDP was $10billion or more. The report states several reasons for their impressive growth in the beginning of the 21st century: -a resource and commodities boom that has resulted in increased earnings all around Africa where these remains a main source of income; government policy promoting investment; the end of political conflicts, and better business environments around the continent. While it is very heartening to see the growth and progress across the continent, ignoring the other 22 countries not included in this report is reckless. For them to only contribute 3% to the aggregate African GDP is tragic. It is also worth pointing out that inequality is rife around the continent and a high GDP per capita does not signal prosperity for all.

South Africa remains a country with massive differences in incomes, and the recent revolutions in Egypt and Tunisia had an economic undercurrent in them with youths angry at the lack of job prospects in relatively rich African nations. If Africas lions are to truly roar there will need to be better leadership and distribution of the undeniable riches the continent possess. The Niger Delta is still rife with violence as locals suffer from environmental degradation caused by irresponsible drilling in addition to being caught in the cross fire of battles between government forces and so called rebels. The report points out the fact that intra-Africa trade is minimal, at about 15% of total trade. This is a major issue considering the potential gains better regional integration could result in. Dependence on the global market for commodities and other goods leaves the continent at the mercy of economic conditions in Europe, China and the United States a situation that could possibly be more stable if Africans can consistently trade among themselves. Obstacles to trade stated in the report include high tariffs, product standards and trading rules in addition to the simple fact that most African nations export commodities/raw materials and import manufactured goods. Poor infrastructure and bureaucracy make matters worse although all hope is not lost. The report discusses the important steps being taken in the East African Community (EAC) to integrate, with the elimination of tariffs and opening up of labor markets. Other regional communities like SADC and ECOWAS are making progress in this respect although they have not reached the level of integration of the EAC. A pan-African economic ideal is possible and may ultimately be the best way for true progress. The example of the EAC is the best move towards the African Economic Community. There is some way to go, but the possibilities of a union do exist. The AEC plan envisions integration within sub-regions such as the EAC and SADC first with the eventual formation of the AEC. The report talks about the rise of a consumer class on the continent being a key engine of growth. A group of people whos rising economic status and subsequent disposable income is set to fuel growth in services and other parts of the economy in different countries. There is a third way potentially: Formalizing the informal economy. Finding a way to formalize the informal sector may be the key change that will bring so many Africans out of the clutches of poverty. The informal sector in different African countries has come about out of necessity as tens of millions have found themselves excluded from the income generating sections of the formal economy. Africans have created their own means of productivity, adapting to the needs of customers who tend to be at the same low level of income. The informal markets have become essential in just about every country, as people employ themselves, feed their families and provide services.

Governments could perhaps introduce a licensing system providing informal traders an opportunity to formalize their operations. Schemes to allow traders to access capital via micro-finance and investor networks could lead to genuine economic growth. As the small traders expand their operations they could then be taxed if they reach a certain income level, providing governments with a new source of income. Such a system would conceivably create more opportunities to earn an income and governments would be able to collect more tax revenues. The McKinsey report paints a positive picture on the future of the continent. Projections predict that the African middle class will swell and their increased discretionary income will see more economic activity and prosperity on the continent. The report is written for a western audience and the focus on GDP and economic numbers is clear, like most literature and narrative concerning the continent. There was no mention of health and improved social conditions for Africans (middle class or not), a fact that belies an ongoing attitude of seeing the continent as a place for European and western advances and resource extraction. Africas future growth is unimportant if the well being of all Africans is ignored. One hopes that the next chapter in Africas reality is a better one with Africans at the forefront of the transformation.
Tinacho Chitongo is a Harare based freelance writer creating interesting content related to southern African cross border collaboration. You can reach him at info@capetocongo.com