Africa's energy sector is being hailed as a promising market that investors can ill afford to neglect. But is Africa's economic outlook really as bright as some market players would have us believe?
It brims over with praise. "A region for dynamic economic growth, opportunities for historic deals, African countries now finally global players." In their latest study Roland Berger Strategy Consultants say Africa now has the same economic potential as that of states like China and India 20 years ago. An expanding middle class is creating a huge market for consumer goods. Christian Wessels, one of the authors of the study, says Africa is now far further ahead than Western perceptions of the continent would suggest. This is because Africans are taking matters into their own hands and have met with astonishing success in a number of areas.
"It's apparent," he says "that the natural resources sector will only play a limited role in future growth. Raw materials will continue to be important, but rather less than at present when compared to consumer goods, the financial sector, the construction industry and major infrastructure projects."
Pressure on governments
The study predicts Africa's economic growth will be energy driven. The sector has been neglected by most governments for decades, but real progress can be expected within the next five years. Mosad Elissiry heads the energy program at NEPAD, the New Partnership for Africa's Development, which is run by the African Union. He says the population of Africa is growing and so too is demand for reliable sources of energy.
"The demand for African resources in the developed countries is also growing," he adds. "This will increase the pressure on Africa to develop its energy sector. The African population is also putting enormous pressure on governments to address the subject."
Many African governments have already responded. Huge hydroelectric plants in Uganda or Ethiopia are one example. But the energy supply in most African countries is still catastrophic, In rural regions only one in ten has access to electricity. Even in most African capitals, the supply is interrupted by power cuts inhibiting sustained economic growth.
Insignificant industrial production
Robert Kappel is an analyst with the Hamburg GIGA institute, specializing in Africa's economic development. He urges caution when predicting the continent's economic prospects and is critical of Roland Berger's latest study. "This development forecast is designed to lure investors to Africa," he says. "But we should look at the facts. In industrial production, Africa has dwindled into insignificance. Only 0.5 percent of all industrial goods that are exported come from Africa, that is half the figure of 20 years ago!"
Kappel believes the main problem with Africa's economies is the lack of dynamism in industry and agriculture. Present high rates of growth are driven by raw materials, as studies by the World Bank testify. Nobody doubts that the African economy is growing, but unfortunately very little of that growth trickles down to the population. On the contrary, poverty is rising in many parts of the continent, Kappel says.
Author: Adrian Kriesch/mc
Editor: Susan Houlton / rm