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| Farmers in Bungoma, Kenya, use cell phones to stay informed on market prices throughout the region. Brent Stirton/Getty Images
Given continued economic weakness in the U.S., it’s easy to imagine that the rest of the world remains similarly stuck. But there is one region of the world that is showing signs of economic strength in new and unexpected ways. That region is Africa.
An economic renaissance currently underway in Africa is providing hope to a billion people there and creating a sense of optimism among youth. And it contains real lessons for us to learn and absorb here at home. Long seen as at the margins of global economic activity, Africa is increasingly looking like an important key to its future. What’s going on exactly? The short answer is that Africa is booming. Seven out of the 10 fastest growing economies in the world are in sub-Saharan Africa. Taken as a whole, Africa’s economy would be the eighth largest in the world, greater in size than rapidly rising countries like India and Russia. What’s important is that this economic explosion is not limited to familiar economic powerhouses such as South Africa and Nigeria, but a host of smaller countries, such as land-locked Zambia, are in on the action as well. What’s even more important is that the African economic renaissance—unlike growth in the U.S.—is broad-based, touching all income groups. The percentage of Africans living in extreme poverty, according to the World Bank, fell below 50 percent for the first time ever last year. Consulting firm McKinsey forecasts Africa will have a larger middle class than India starting next year. So what’s behind Africa’s meteoric rise? There are two mega trends at work. The first is a dramatic surge in the number of young, healthy and productive people. That trend has been driven by the slowing pace of new infections of HIV/AIDS, malaria and other preventable diseases, and by the slowing rate of mortality overall. In Malawi, for example, new HIV infections have fallen by 73 percent since 2001. As a result of impressive gains like these, Africa’s population has grown by 250 million people—a number greater than the populations of Brazil and Canada combined—in little more than a decade. Hundreds of millions of young adults and their resulting productive capacity have helped set the stage for Africa’s economic growth. The second key factor is the continent’s increasing reliance on its own markets to fuel its economy. Past African growth spurts were fueled through the extraction of natural resources for export from the continent. Natural resources are still pivotal to Africa’s economic story, but what’s totally different is that the economic services provided by Africans for Africans is now more important than selling goods to others. In fact McKinsey points out that two out of every three dollars in new African economic activity comes from goods and services sold within Africa itself. And it’s this reversal in the source of African prosperity which gives confidence that the region may have entered a new phase in its history. Given the sustained upswing, there are likely takeaways from the African economic experience for those of us on other side of the Atlantic. If so, here are three good candidates. Provide local services for local communities. Even in the most critical economic circumstances there are essential goods and services that local economies can’t do without and will support financially. That’s the example of Zimbabwe-based Innscor Limited, a food services company that began in 1987 by cooking chicken and baking bread in a local neighborhood of the capital city. As Vijay Mahajan details in his book Africa Rising, against the backdrop of a prolonged economic depression, hyperinflation and political upheaval, Innscor grew from a community business to one of the largest companies in southern Africa with operations in seven countries in under 20 years. As other businesses folded due to the collapse of Zimbabwe’s economy at the hand of President Robert Mugabe, demand for food provided by Innscor’s restaurants and bakeries increased rather than shrank. The skills the company honed during these tough times allowed it to grow and the know-how gained gave it the strength to thrive in equally tough markets across Africa. Technology can help level the playing field. Africa has one of the lowest broadband access rates in the world, but technology is still making all the difference through the innovative use of cell phones. In 2000 there were 3 million cell phones in Africa; now there are over 750 million. Simple, non-smartphone platforms are helping the poorest improve their living standards. Services that transmit daily crop prices to rural farmers, as Jenny Aker and Issac Mbiti detailed in the Journal of Economic Perspectives, have boosted farm profits by as much as 30 percent in some areas. In Kenya, the text-based banking application M-Pesa provides 8 million subscribers with basic banking, money transfer and bill payment services. In countries without an expansive banking infrastructure, mobile money applications like M-Pesa help Africans meet their basic needs. Creativity is your greatest strength. “All Africans are creative by nature and entrepreneurs by necessity,” says Nigerian-born Bola Marquis, founder of the London-based Okun contemporary African menswear line. In a number of important areas these two qualities have combined to create a new force. Mercedes-Benz Johannesburg Fashion Week is now a must-stop for international fashion world, with Arise Magazine Fashion Week not far behind. Nollywood, the Nigerian film industry, now churns out more films than Hollywood or Bollywood, the Indian film juggernaut. Just this past year two African Web-based networks have launched from Nigeria Ndani TV and Arise TV. “Youth culture is driving Africa. We want everything that people have in the West, but we want to create it and we want to control it,” adds Marquis. As Africa’s economy continues its rebirth, those may be words that we all increasingly learn to live by.
Wingspan Portfolio Advisors Blogspot
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What Africa's Booming Economy Can Teach the U.S.
