Africa growth

By Juergen Braunstein, London School of Economics

Sovereign Wealth Funds (SWFs) could easily resolve Africa’s infrastructure funding issues, or go a long way toward doing so. So why are they so hesitant toward investments in Africa and what are the chances for change?

There is no lack in money. SWFs are keen to diversify into real assets with long-term growth prospects – ample opportunities for which exist in many parts of Africa.

Indeed, if SWFs – large state owned investment funds – were to steer a mere 1.3 per cent to 1.5 per cent of their total assets into sub-Saharan Africa, they could close the region’s infrastructure deficit over the coming years. Read more

“They’re coming up every morning, just like churches,” Peter Kari, a father of two living in Nairobi’s Kawangware slum, says of the private schools mushrooming in his neighbourhood. “They die as they’re being born. You can wake up one morning and see a tin shack. The other night it was a pub. Today, it’s a school.”

A ride down one of the main roads in Kawangware offers evidence for Kari’s claim. Within five kilometres, there are at least fifteen visible signs for private schools, with names like ‘Brightest Star,’ ‘Top Shine,’ ‘Springs of Wisdom,’ and one (see photo) unfortunately misspelt ‘Havard.’ Read more

At the entrance to Shomaa Impressive School, a compound of 11 classrooms built from thin wooden boards in the Lagos slum of Makoko, prospective parents are greeted with a banner showing four children in graduation gowns and the motto “Raising future professionals”. Just as the message is crafted to appeal to the aspirational market traders and fish sellers who send their children to the nursery and primary school, the daily tuition fees averaging less than $1 a day are also tailored to their modest budgets.

Schools like Shomaa, which has around 100 students, are contributing to a boom in private education in Lagos and other cities in Africa.

A pupil at Shomaa Impressive School, Makoko, Lagos. Photo: Tosin Sulaiman

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By Sara Menker, CEO and Founder, Gro Intelligence

Last week, at a “Solve for X” gathering in Nairobi, I opened my presentation with a pop quiz. There were only two questions, and yet everyone got both wrong.

The first question: What was Nigeria’s GDP in 2013 — $270bn, $460bn, or $510bn? The second question: How much corn did Kenya produce in 2013 — 3.3m, 2.8m or 3.6m tonnes?

In both cases the crowd was evenly split amongst the choices. Read more

By Morten Jerven of the Simon Fraser University

Measuring GDP is like standing on most bathroom scales: they may be wrong by a little or a lot, and that hardly matters if what interests you is whether you are gaining or losing weight. But if you are interested in comparing yourself with your friends or neighbours, accuracy matters a lot. Read more

By Razia Khan of Standard Chartered Bank

Africa is rising, but poor data availability means that we can’t be sure by how much.

There are proxies that help shed some light. Chinese customs data show that Africa-China trade ballooned to $210bn last year from $5bn-$7bn at the end of the 1990s. Lending to the private sector in Africa has also surged, with private-sector credit growth more than doubling in real terms between 2000 and 2010.

Such data points aside, however, little is known about the true magnitude of Africa’s growth surge. Read more

Following Nigeria's example?

The International Monetary Fund’s “Africa Rising” conference opened in Maputo with gushing descriptions about the “potential” and “opportunity” of the fast growing continent.

IMF chief Christine Lagarde, the guest of honour, told the gathering of politicians, aid workers and business types that “we are witnessing a moment of transformation in Africa.” Former US President Bill Clinton joined in via video to talk of Africa’s “remarkable economic progress.”

Yet intertwined with the unabashed bullishness were warnings about the potential potholes that line the road ahead, especially for those nations endowed with rich reserves of the natural resources that have been driving much of the continent’s heady growth. Read more

That's flexible

Are fixed exchange rates bad for growth? Much of the economic literature suggests no causal relation between a country’s exchange rate regime and economic growth. But the IMF has produced a paper suggesting that sub-Saharan Africa may be different.

Manuk Ghazanchyan and Janet Stotsky, the authors, perform a random effects model and find that non-oil exporting nations that claimed to have a flexible exchange rate had significantly higher GDP per capita growth from 1999 to 2011. Read more

The IMF may have outlined the risks to sub-Saharan Africa from tighter monetary policy in the US and other shocks (read the FT’s Javier Blas for the full story) – but as the report makes clear, it’s not just the US that has an impact on Africa’s fortunes.

There’s China too, of course. In a section titled Africa’s Rising Exposure to China: How Large Are Spillovers through Trade?, the Fund looks to quantify and group the countries most exposed to a China slowdown. Read more

By Andrew Brown of Emerging Capital Partners

Last week the International Monetary Fund (IMF) predicted a further drop in China’s growth to 7.3 per cent in 2014, the lowest figure that the country has experienced in the last 23 years.

China’s continued economic slowdown as it shifts from export-led to consumer-driven growth has prompted speculation as to the knock-on effect on economies that have benefited from China’s rise. Debate has centred on whether many frontier economies, including those of sub-Saharan Africa, are reliant on continued rapid growth in China’s demand for commodities to drive their own economic development. Read more

What’s the difference between Kenya and Nigeria? About two centuries, according to a new study by Stephen Broadberry and Leigh Gardner, two professors at the London School of Economics.

The pair have totted up the levels of GDP per capita of the countries of Africa, and compared them with historic rates of GDP per person in pre-industrial Europe. Citizens of Sierra Leone are about as rich as early medieval Englishmen, and modern-day Kenyans are just as rich as Elizabethans. Read more

It was the growth story that everyone was talking about. Africa, especially the sub-Saharan part, was finally coming good, with growth rates averaging well over 5 per cent and seemingly a one-way bet.

But the in its latest world economic outlook, the IMF has trimmed its 2013 growth forecast for the region by 0.4 percentage points. That puts it alongside Latin America as the region with the biggest cut in the IMF’s forecast. Even North Africa – including troubled Egypt – had a smaller cut in its growth forecast. What gives? Read more

French retail giant Carrefour has its sights set on sub-Saharan Africa’s booming consumer markets, and will begin setting up shop on the west coast of the continent within the next two years.

A joint venture between the supermarket retailer and the Africa-focused trading and distribution company CFAO – a subsidiary of Toyota Tsusho, the Toyota Group’s trading arm – announced on Thursday will open outlets across eight central and west African countries. Read more

From the ‘hopeless’ to the ‘hopeful’ continent, a decade of strong growth has changed perceptions of sub-Saharan African economies – not least among international investors, who have rushed to recent Eurobond offerings from the likes of Zambia and Rwanda. Rubbing against the optimism though are criticisms that the growth achieved has been far from inclusive, with human development lagging behind. Chart of the week takes a look. Read more

By Craig Baker and Andy Ratcliffe

The arguments over whether South Africa should still receive aid from Britain, following Justine Greening’s announcement that there would be no new DFID projects in South Africa, show how the global debate about the continent is shifting.

Africa was once viewed as a region that had stalled, making little or no progress. Now, the world is starting to notice the pace of economic change. Headlines on the theme of ‘Africa rising‘ are appearing more and more in international newspapers. But many doubt that this economic growth is actually improving living standards for the average African citizens. Read more

By Tony Elumelu

Africa’s growth continues to make headlines at home and abroad. But while the continent has made impressive gains at a macro level, those gains have been slow in creating jobs and wealth at a local level.

More needs to be done, and soon, if Africa’s growth is to be sustained, and Africa is to reach its true economic potential. Talk of a demographic dividend, is in reality a wake up call for politicians and the private sector, bringing with it considerable social, economic and environmental challenges. Read more

By Bright B Simons of IMANI Ghana

There are two prevailing and conflicting views of progress in Africa: the ‘incrementalists’ and the ‘cyclicalists’. The incrementalists say Africa is ‘catching up’; the cyclicalists say it is ‘not catching up fast enough’ because it is locked in a ‘two steps forward one step backward’ rhythm.

My opinion is that both views are muddled. Read more

By Kandeh K Yumkella of UNIDO

When I look at the future of my continent, three words come to mind: hope, opportunity and responsibility.

Hope, because there is positive change happening throughout Africa. Opportunity, because of the commodity boom. Responsibility, because we – the African people and our leaders – still need to create 10m jobs a year for our young people, and lift out of poverty the over 50 per cent of Africans who still live below $2 per day. Read more

Africa’s fast-growing personal care and beauty markets are prompting ambitious innovation plans from two of the sector’s giants, Unilever and L’Oreal, both looking to capture the expanding middle classes.

But you can’t just take all your western or Asian products and sell them in Africa – new, tailored ranges are needed. Read more

Men speak on mobile phones at the Adjame market in Abidjan

GDP calling

GDP growth is thought to be correlated to everything from conflict risk to whiskey consumption. And the current slew of positive stories about Africa are driven, in part, by the impressive GDP statistics posted by countries across the continent.

But these numbers are poor estimations of economic development, says Morten Jerven at Simon Fraser University. His argument is not that GDP does not say much about happiness, equality, environmental sustainability. It’s a more technical point: many figures are, well, just wrong. African GDP might actually be growing faster than we think. Read more