Professor Carlos Lopes in Business Day
GSDPP Professor Carlos Lopes published this op-ed in Business Day on 10 May. Full text below.
Africa Poised for Greatness, but Governments Must Act Fast
Conventional wisdom tells us that Chinese are buying up Africa faster than any other investors. It tells us that African banking lags in terms of innovation and reliability or that no African country is at the forefront of global innovation.
But conventional wisdom is often wrong.I think it’s important to start off by recognising that we don’t have the Africa we think we have. That’s really fundamental.
What do I mean? Perhaps we can start by noting that in actuality China is only Africa’s third biggest investor. The second? France. India is hot on their heels too. If that surprises you, wait until you learn that over 50% of the world’s mobile banking happens on the continent, with Kenya taking the lion’s share globally.
I enjoy these kinds of shock statistics, most recently sharing them with an audience of SAIIA members during an address on “World Changes Affecting Africa” – a talk I have given to UN Leaders, Chatham House and African Union Foreign Ministers.
The reason they hold shock value, of course, is because “common knowledge” is a powerful thing. It’s the thing that has hamstrung African development historically, too – after all, risk perception is based on data; if we had the right figures, Africa might be able to obtain a more favourable credit rating (certainly a sore topic in South African currently).
Common perceptions of African development are built on outdated – or often simply invented – facts. Most likely, for example, we radically underestimate the GDP of Africa. The raw data is sometimes simply not available. Only 12 of the continent’s 54 countries have their national accounts up to date, if we take into account methodological standards requiring the year base be no older than five – a round dozen that doesn’t include South Africa. Worse, roughly sixty per cent of the continent’s citizens are not in possession of an ID card. You can’t transform if your two primary data sets – people and accounts – are not up to date. You can compensate with other approaches, but they are no substitute. We must, therefore be savvy on how we assess the continent.
Africans are frustrated with the ‘Africa Rising’ narrative which, in any case, was always more about business opportunity rather than real transformation. GDP growth is certainly not enough: how can policies materially change the social fabric? That’s what we’ve got to start considering.
We may have a long way to go to get a reliable picture of Africa, but there are several indicators that give a good sense for future development.
There are what I term three ‘megatrends’ impacting African development. The first of these is demographics. Africa’s population is projected to double to two billion by 2050: a mind-boggling number at the best of times, but it is the context of this rapid growth that I find significant. Not only will the continent have a larger labour force in two decades than India or China but, uniquely, it will have a vast concentration of youthfulness precisely at the time when the Western population is ageing. A full quarter of the population of Europe and Japan are over the age of 65. By 2065, it is projected that number will balloon to three quarters. By contrast, twenty-two African countries have a median age of 20 or below.
Technology is my second Megatrend. Its absolute centrality to our lives has meant a very rapid move to commodify information, diminishing the value of goods. Development thinking has mostly yet to adjust to that notion.
The biggest corporations – the ones that build value the fastest – mine information not metals. Now, information about a person is more valuable than platinum. We are about to live through a revolution in the way economics works. The question is: how do we sustain jobs when most economies are stuck in the old way of doing things? Or when they aspire to just imitate what will no longer be available?
There is a window of opportunity: to use democratisation of information access in one’s favour. In truth, we are not experiencing just a revolution of technology, but a potential revolution of regulation. For example, if as we have seen, Africa already leads the world on mobile banking, what is to prevent countries from allowing telephone operators to function as micro-banks? With a little imagination, the results can be extraordinary.
Financial specialists discovered this in a recent test, when Kenya offered bonds in 29 Dollar units over cell phone networks to fund infrastructure. The full amount was snapped up in just two days. In fact, frugal technology is just as important as the high end. It offers opportunities for Africa if we grab them fast enough.
Climate for Investment
Unsurprisingly, my third Megatrend is climate change. The Paris Agreement doesn’t make total sense for Africa. In Africa where we feel the worst of the effects of climate change while being among the lowest polluters, it’s not enough to reduce temperature by only 1,5 degree, or to bank on voluntary commitments alone – we need more and we need it now.
With many places in Africa being in prime position for solar and wind technology, building green industrialisation from the ground up is a real opportunity for a continent that does not require much retrofitting. Africa is in the unique position of being able to lead by leapfrogging.
For instance smart cities should not be a preserve of the first world: Africa can build its economy in a way that is far more sustainable if it takes a brave new approach instead of the old. With fossil fuel and manufacturing mineral reserves projected to run out within many of our lifetimes, surely innovative thinking is the only viable option remaining. What about powering manufacturing with renewable energy, reducing carbon footprint and discovering sustainable agriculture or the blue economy?
Yet, all of these opportunities – demographic boom, technological innovation, trend towards renewables – will remain just that if governments do not recognise them, changes policies and regulate accordingly.
Extractive industries are patently not the way of the future. Indeed, they are not even the way of the present, making up only 6% of African activities and 1% of the continent’s employment. We talk about them because where they exist, Africans are absolutely dependent on them.
Governments need to put policies in place that recognise their economic vibrancy is shifting to internal consumption and manufacturing and services, away from commodities alone. And they have to tax accordingly. Is it possible? Certainly. History shows policy impact: just thirty years ago, the per-capita income of China was lower than that of Africa. But it will take conviction to chart an Afro-centric path: insight must meet foresight to stimulate the environment for taking advantage of these three megatrends.
Ironically, it is smaller African countries who are leading the way on innovative growth strategies: the continent’s annual growth in 2016 was pegged at 4.4%, if you removed the ‘big three’ of South African, Egypt and Nigeria from the equation. With them included it dropped to 1.6%.
South Africa may be a rainbow nation, but it is wasting time searching for its pot of gold in the wrong place.
• Lopes served as executive secretary of the UN Economic Commission for Africa until November 2016. He is a professor at the University of Cape Town’s Graduate School of Development Policy and Practice.