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Africa's economic boom

Julia Hahn / ael
May 17, 2013

Africa is celebrating 50 years of political unity and the economy is also booming. It's now widely seen as a region of great opportunities, but experts are skeptical about how long this will last.

Skyscrapers in Luanda, Angola. Photo: AP, Schalk van Zuydam)
Image: AP

Two out of three Africans have a mobile phone or smartphone. Purchasing power on the continent is increasing, markets are growing and more and more Africans are becoming billionaires. This is a success story which politicians, economists and the media are happy to talk about.

Anver Versi is a Kenyan economic journalist and editor of the London-based Africa Business magazine. He says Africa is catching up.

"[One could argue] that Africa is going to be a major market over the next 50 years, because it has resources in addition to its manpower," Versi told DW.

"You will have to say that Africa is the most attractive investment area and the Chinese recognized that 10 or 15 years ago. And perhaps German companies as well as the rest of Europe should wake up to the possibility," Versi said.

No reason for euphoria

The World Bank says, between 2013 and 2015, Sub-Saharan Africa's economy will grow at an average of five percent while the global economy will only grow by about three percent over the same period.

A man speaking on a mobile phone
More than 60 percent of people living in Africa own a mobile phone or smartphoneImage: picture alliance/Mika Schmidt

However, high growth rates are no reason for euphoria, says Robert Kappel, a German Africa researcher from the GIGA Institute in Hamburg. He has been researching the development prospects of 42 sub-Saharan countries. He says international comparisons show that most of them are performing poorly.

"The growth is mainly coming from outside factors such as the demand for raw materials and agricultural products that has increased greatly in recent years and has pushed up prices. That means export has greatly contributed to this high economic growth, and that is also a great weakness," Kappel told DW.

Dependency on foreign trade

The International Monetary Fund (IMF) and the World Bank recently warned that Africa is becoming dependent on trade with foreign countries.

At this year's World Economic Forum in Cape Town, former UN Secretary General Kofi Annan urged the industrialized nations to apply stricter rules for trading in natural resources with Africa. He said corruption and tax evasion are bleeding wealth from the continent.

Industrialization in Africa remains slow and agriculture cannot even meet the needs of Africa's own populations. Job markets show zero growth. In South Africa, more than 25 percent of the population, mainly young people,are unemployed.

Big city boom

The boom is most visible in affluent cities such as Luanda, Johannesburg and Nairobi. These cities are home to Africa's new middle class and the boom comes from construction, telecommunications, retail and banking sectors.

Students in uniform sitting in a class
For sustainable economic growth for future generations, Africa needs to speed up reformsImage: DW/J. Hahn

Strive Masiyiwa, a native Zimbabwean, is the founder of the Econet Wireless telecommunications company. The company now operates in 17 African states, in Europe, South America and Asia. Masiyiwa is one of the wealthiest people in Zimbabwe. He warns against too much optimism.

"Africa is doing well. We are making tremendous progress, particularly in the past two decades. But if we are to sustain this and to ensure growth that allows for employment creation for the youth and greater equitable distribution of prosperity, then we need to speed up the reforms, deepen transparency, reduce bureaucracy in getting projects approved."

Winners and losers

Researcher Robert Kappel said some model African countries such as Mauritius, the Seychelles, Cape Verde, Botswana, Ghana and South Africa, have already implemented all that.

"But 20 to 25 per cent of African countries are still fragile. They suffer from political turmoil and military coups and by no means can one speak of positive growth dynamics in those countries. Income is low and the population play no real role in business processes."

Mali is fighting Islamists in the north, the Democratic Republic of Congo is fighting the M23 rebels and the Central African Republic is recovering from a coup. Even in oil-rich countries like Nigeria, poverty is growing and political turmoil and corruption are hindering real development successes.

Men in military uniforms with guns. Photo: (SIA KAMBOU/AFP/Getty Images)
Several African countries are still suffering from political turmoil that hinders positive growth dynamicsImage: AFP/Getty Images

"Raw materials are not always a good resource for economic development. Most developed countries do not have oil or large deposits of natural resources. They focus on other things such as the service sector or agriculture," Kappel told DW.

Need to improve infrastructure

For Anver Versi, if Africa is to enjoy sustainable growth, it must invest more in infrastructure. Doing business in Africa is more expensive than anywhere else in the world.

"The problem there is that you have major manufacturing centers, like in Kenya and South Africa, and you have other countries which are landlocked and these countries depend for their goods on the manufacturing centers," said Versi. "But the roads are bad and railways don't work and getting goods to them is an expensive exercise."

Whether Africa's economic boom will last depends on a long list of factors, says Robert Kappel.

"Further economic reforms, the opening up of markets, better investment legislation so that both local and international companies really do invest. And if the education sector and infrastructure are improved, then Africa can continue to grow and become a continent of hope."

And there would be a happy end to the tale of Africa's economic boom.