Why Africa’s future looks optimistic

Sponsor generated content

GE-2
Courtesy of GE
Courtesy of GE

Why Africa’s future looks optimistic

Sponsor generated content

GE-2

Africa is at a crossroads. Over the past decade and a half, the continent has emerged as the most promising growth region, exceeding world growth by an average of two percentage points per year.

Commodities have certainly helped. In the late 1990s, Sub-Saharan Africa’s fortunes turned when established commodity exporters capitalized on higher prices. Untapped natural resource deposits across the continent attracted investors’ capital and foreign expertise. Commodity exports also increased in Asia, especially China.

Yet there is a lot more to Africa’s growth story. Economic policies have improved, political institutions have strengthened, and many countries registered improvement in four out of five dimensions of the World Bank’s governance indicators.

However, Africa’s transformation is not yet self-sustaining, as it remains overly dependent on commodities. While governance has improved significantly, reforms still lag significantly behind other growth markets. The risk that progress might stall, or even backslide, is present.

Depending on the speed of economic and governance reform, Africa’s future could play out in one of four different scenarios: infrastructure, trade, human capital, or innovation. (See illustrated info graphic below.)

Lack of infrastructure is the biggest obstacle to faster economic development. More dense and efficient transportation networks would facilitate trade and communications, allowing economic development to spread into rural areas. More reliable and distributed power would greatly facilitate manufacturing activities. Better access to power, together with portable cost-effective healthcare, would ensure better living conditions and health standards. This would make it easier for citizens to be more engaged in the political process and support a further improvement in governance.

Accelerating both regional and global trade integration could generate significant benefits. The first meaningful steps have been taken with a move toward free trade, both within and across the East African Community, the South African Development Community, and the Common Market for Eastern and Southern Africa. Altogether, the creation of a common African market underpinned by a joint infrastructure strategy would make it easier for African companies to achieve scale and gain competitiveness on the global scene. This would boost growth, employment, and productivity.

Company-sponsored training programs could strengthen human capital by creating the workforce needed by fast-developing industries. Governments and companies should cooperate in the development of professional schools closely aligned to industry to match the supply skills with demand.

African businesses are attuned to the fact that innovation is accelerating progress. New waves of disruptive innovations, such as merging the digital world with the physical world, can allow emerging markets players to leapfrog existing technologies and gain a precious competitive advantage. The viral success of M-Pesa, the mobile banking and microfinancing system that quickly bypassed the relative underdevelopment of traditional banking, is a case in point.

While the road ahead is long, the economic and political progress already achieved is impressive. This is the time to bet on Africa.

Courtesy of GE