Many African countries have enormous economic potential

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Parent Category: Africa and The World

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Created on Wednesday, 26 September 2012 10:03

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New study evaluates Africa's economic potential

Many African countries have enormous economic potential, partly due to a growing middle class. Important factors are falling birthrates and an increase in democratic structures.

Africa is booming. The economy in the Sahel region is growing by more than five percent annually, says the African Development Bank (ADB). And the trend looks set to continue.

Even the continent's weaker countries are displaying stronger growth than Europe, says Mthuli Cube, the ADB's chief economist. No African country will be in the red this year. Despite this, investors have been hesitating to commit themselves - put off by the unstable political system in many African nations, coupled with poor infrastructure.

The Berlin Institute for Population and Development has conducted an analytical study of economic growth in Africa, which takes into account both positive and negative factors, the aim being to identify the real level of growth potential. The study was commissioned by the Society for Consumer Research (GfK). It took a close look at the performance of fifty African states in four different areas: economy, the rule of law, population development and living conditions.

Population growth opportunities

In industrial nations, population growth is often regarded as a negative development, conjuring up pictures of uncontrolled urban expansion or large familes fighting for survival. The Berlin Institute sought to provide a more accurate picture. According to the Institute's Director and co-author of the study, Reiner Klingholz, what is decisive for a country's development is the changing composition of the population.

Although birthrates are falling in individual African countries, population levels overall are still growing and then, says Klingholz," the number of people of working age increases." This represents a demographic dividend. "If the high number of people of working age can be provided with jobs, then the countries of Africa could embark on a positive course of development."

A larger workforce means the number of consumers also grows. This is already being seen in a number of countries, with the appearance of a new middle class able to buy products such as mobile phones or more expensive foodstuffs. For these people expensive furniture or cars are still luxury items, out of reach of many, but they are able to afford more than the bare necessities. "This is the first step towards a consumer society, which increases demand and boosts local production," says Klingholz.

Market for new technologies

Michael Monnerjahn of the German-African Business Association also sees great economic potential in Africa. This is very interesting for German companies, he says. Not least because Africa has a growing need for affordable consumer goods. The service sector is also growing in importance, Monnerjahn says. "Especially in the banking sector, or in telecommunications, there has been very strong growth. fifty years ago this would have been unthinkable " The enormous popularity of mobile phones in Africa is facilitating the development of new technologies, such as mobile phone banking. "Kenya is the worldwide leader in this field," Monnerjahn says.

The study names ten countries as the main beacons of hope: South Africa and Namibia in the south, Morocco, Tunisia and Egypt in the north, plus Senegal, Gambia, Ghana, Gabon und Mauritius. The absence of two important countries from this 'top ten' - Nigeria and Kenya - comes as a surprise. In Nigeria, for example, a growing population and expanding economy are attracting an increasing number of foreigh companies.

" Nigeria alone accounts for ten percent of Germany's trade volume with Africa", Michael Monnerjahn points out. The country with a population of 150 million could potentially replace South Africa as the continent's biggest economy, he says. But only if a number of problems are dealt with. Here, Reiner Klingholz points to the politicial instability and poor living conditions in Nigeria. Only a small elite benefit from the country's oil wealth. In Kenya, the problems are of a different kind. The country is unable to feed its growing population or provide adequate medical care.

Democracies are better trade partners

For Michael Monnerjahn, there can be no doubt that observance of the rule of law and democracy are indispensable for good trade relations. For a time it had been thought that autocratically ruled countries (which were therefore stable) were reliable parters for Germany, countries such as the Libya of Colonel Gadhafi.

"Two or three years ago, every observer would have said that the Gadhafi family would continue to steer Libyan politics," says Monnerjahn. Today, it is clear that the Gadhafi clan was no guarantee for long term stability. There is now a realisation that transparency and the rule of law in a functioning democracy is what counts.

Date 14.09.2012

Author Philipp Sandner /sh

Editor Asumpta Lattus Source: Deutsche Welle

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