African Insights


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Africa rising – for whom?


Mauritius, a services-based economy and middle- income island state with no commodities to speak of, earns kudos not due to its relatively high GDP per capita, but in recognition of high ranking in the human development index (which includes decent life expectancy, low mortality rates and high literacy levels). Such markers of country success and prosperity tend to be underplayed.


The African island state forged ahead, in the first decades of independence, to translate economic growth into human development and upskilled its populace, reflected former minister L Amédée Darga in Advocates for Change: How to Overcome Africa’s Challenges (Picador Africa). He discusses how government gave citizens free education and, to the elderly and students, free healthcare and free public transport. In this way, students from poor households would not end up missing their classes because they could not afford something as simple, but critical, as bus fare.


While the tendency is to view per-capita rankings as indicators of prosperity, such digits could actually mask exclusive growth amid worsening poverty levels. Such contradictions, says Davies, are a reality in some mineral-rich nations. For instance, he argues that sustained growth in GDP in Angola and Nigeria – which are directly correlated to a jump in oil prices – had “minimal trickle-down effects [because] rent is almost always captured by the political elites”.


On the other side of the coin are Ethiopia and Rwanda, whose umpteen farms and fields are vital in ensuring food security. Growth in these countries has quadrupled and doubled, respectively, since 2000 and the masses are the direct beneficiaries, reckons Davies, asserting that political leaders in those countries play fair. Importantly, life expectancy in both countries has shot up into the mid-60s and the poverty headcount has moved in the opposite direction. A similar trend replays itself in Ghana, yet another country that excites Davies, an expert on Africa and emerging markets abroad. “We’re seeing trickle-down effects in Côte d’Ivoire and Morocco. The new government in Ghana is doing a good job,” he says.


While singling out Nigeria, the most scalable market on the continent, given its population of 170 million (three times the size of South Africa’s), Mwanza also likes the growth prospects offered by each region in Africa.


Such an “Africa rising” narrative is rooted in a raft of solid statistics from many parts of the continent, underscoring spirited growth which has propelled Africa into the world’s second-fastest-growing region behind South-East Asia. On the debit side, the many cases of unequal growth and widening disparities have trigged a scornfully question: for whom is Africa actually rising?


“[Growth] needs to be not only ‘sustainable’ and ‘good’, but also ‘inclusive’,” warns Saville. Bhaskaran agrees. He adds that since the size of the informal economy could point to factors like graft, it is imperative to scratch beyond the surface while ensuring a growth measure that absorbs all demographics. “Youth development and entrepreneurship, whether social or commercial, are key to transformation,” he asserts.


This is where SPI and similar gauges are gaining traction in emerging markets and around the world, because they focus on these transformative efforts. Human beings value the likes of political freedom, vibrant community life and many other non-monetary goods, notes Mwanza. “[The SPI] also shows the reality that there are some countries – such as those in the Middle East – which have among the highest GDP per capita numbers, but have little freedom of expression, for instance.”


Africa, too, shows such discrepancies, which must be addressed if the continent is to cement its potential as an investment destination. Only then can perceptions change.


Banking on Africa


Stripping things down to the basics, Bhaskaran notes: “What investors want most of all is a good return-risk offering.” And this is where the role of banks in developing countries must extend beyond maximising shareholder returns.


“They should contribute to development and [to] helping small businesses. Banks are also in a good position to explain a country’s good and bad sides to foreigners so that they get a sounder and more balanced perspective,” explains the Singaporean economist.


While asserting that having banks operating in emerging markets could be viewed as a vote of confidence in the geographies concerned, Davies urges banks to play a “more active role to ensure no dirty money is in [or is relayed, via the banking] system”.


Mwanza points out that Absa is influencing paradigm shifts by way of new tools to track development as required to measure prosperity and success, especially in emerging markets.


Harnessing innovation also holds tremendous potential for Africa, he says. “Leap-frogging has led to a ‘digital first’ attitude that’s made the region a hotbed, and world leader, for mobile money and fintech innovation. With this in mind, another key enabler of Absa’s strategy is building scalable, digitally-led businesses.”


In the final analysis, successful countries share common features, such as strong economic institutions and a business climate conducive to investment. Emerging markets should be commended for striving towards that equation. However, equally important is a need to step up on human rights and inclusive growth by investing in human capital and public goods like education. This approach has worked for Mauritius, which now ranks first in Africa on the Human Development Index. Africa would be smart to emulate the Mauritian model.


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Gradient Issue 2 39


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