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Can Africa keep its economic winning streak alive?

First Published Aug 05 2014 10:44AM      Last Updated Aug 05 2014 10:45 am

FILE - In this file photo taken Wednesday, Sept. 29, 2010, commuters exit and board a train bound for New York during the morning rush hour in Mt. Vernon, N.Y. Economists have long argued that rising economic inequality has held back the U.S. rebound from the Great Recession. Now, an analysis by the ratings agency Standard & Poor’s confirms it: The widening gap between the wealthiest Americans and everyone else has made the economy more prone to boom-bust cycles and held back the rebound from the Great Recession. (AP Photo/Seth Wenig, File)

Washington • They export BMWs and birdseed and plenty in between. Their middle class is growing fast enough to draw the likes of Marriott and Wal-Mart. China, Europe, Japan and the United States are vying to build roads and power plants there.

No longer are the nations of sub-Saharan Africa, long a symbol of war, famine and corruption, an economic basket case. Six of the world’s fastest-growing economies are there. Higher oil prices, richer consumers and sounder governments have raised so much interest in Africa’s economic promise that it’s being showcased this week at the first U.S.-Africa Leaders Summit in Washington.



The question is: Can all this endure?

Africa has stood on the verge of prosperity before only to see its opportunities fizzle. Yet never before has it stood to benefit as it does now.

"Africa presents enormous opportunities," says Paul Sullivan, director of international business development at Acrow Bridge of Parsippany, New Jersey, which has put up hundreds of prefabricated steel bridges across Africa.

As African leaders gather to mark a decade of economic gains, they appear intent on sustaining the growth and ensuring that the benefits are spread broadly and not siphoned away by corrupt officials and foreign companies.

In the decades after many of the countries regained their independence in the 1960s, their natural resources — Nigerian oil, Liberian diamonds, Congolese copper and cobalt — failed to support durable growth. They sometimes proved a curse: Proceeds would vanish into Swiss bank accounts of corrupt leaders and give armed factions something to fight over.

Analysts note hopefully that the current resurgence is built on foundations sturdier than the ups and downs of commodity prices. Many African nations have become more democratic, making it easier for entrepreneurs to do business, and have boosted investment in education and infrastructure. A decade of solid growth has created a middle class with more spending power — 350 million strong in 2010 by the African Development Bank’s count, up from 220 million in 2000.

Armed conflicts are down despite headlines about the terrorist groups Boko Haram in Nigeria and al-Shabab in Somalia.

The improved environment has benefited even countries without bounteous natural resources. In resource-poor Rwanda, for example, economic growth rose from an average 1.7 percent from 1990 to 2000 to 7.7 percent the next decade.

The consultancy Ernst & Young ranks Africa as the world’s second-most-attractive market after North America. Cumulative foreign investment in sub-Saharan Africa has catapulted from $33.5 billion in 2000 to $246.4 billion in 2012, according to United Nations numbers crunched by the Brookings Institution.

South Africa exports BMW sedans to the United States. Ethiopia has developed a niche making shoes. And it produces the best-selling imported birdseed in the United States.

"We see Africa as the fastest-growing market worldwide," says David Picard, a manager at heavy equipment manufacturer Caterpillar.

In 2011, Wal-Mart acquired Massmart Holdings, which runs 350 stores in 12 sub-Saharan countries. Marriott International last year agreed to buy Protea Hospitality of South Africa, a 116-hotel chain in seven sub-Saharan countries.

Cummins, based in Columbus, Indiana, has enjoyed double-digit sales growth this year in supplying power equipment to Africa. Consumers in the Nigerian capital of Lagos eat burgers from Johnny Rockets and ice cream from Cold Stone Creamery.

No nation has been more aggressive in Africa than China. Its direct investment in sub-Saharan Africa has jumped from virtually nothing in 2002 to $18.2 billion in 2012. China is hungry for oil, coal and other resources and eager to develop the roads, bridges and ports needed to pull them out of Africa.

Africans tend to favor doing business with China in part because it’s less likely than Western nations to demand economic and political reforms to accompany trade and development deals.

"Investors from the U.S. and Europe have tended to be large investors who demand all kinds of facilitation, who expect all kinds of conditions," says Frederick Golooba-Mutebi, a Rwanda-based researcher and honorary fellow at the University of Manchester. "I do not see Europe and the U.S. catching up with China."

 

 

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