Saturday, August 18, 2012

Turning Africa Into An Economic Powerhouse

In Nicholas Kristoff’s July 1st article in the New York Times, he writes about the economic progression seen in Africa over the past decade. The position China was in twenty years ago – gradual privatization of industry, infrastructural development, and a greater emphasis on improved healthcare and education – is where much of Africa finds itself today. Between 2007 and 2011, countries such as Angola, Ethiopia, Mozambique, and Nigeria all had more than a 6% increase in their annual GDP. On average, the continent’s labor force has increased by 2.7% each year since 2007. There are reasons to be optimistic about what the future holds for Africa, which has experienced every horrific disaster from genocide to the AIDS epidemic since gaining independence throughout the 1960s.

However, optimism must remain anchored in realism: the conflict between Sudan and its new neighbor South Sudan has displaced roughly 500,000 people since last July, and killed thousands. Similar wars are being waged in the Democratic Republic of the Congo, Uganda, and countless other countries across the continent. There are still very real problems that plague Africa, and while aid does continue to flow from more prosperous nations around the world, there is little hope that these conflicts will resolve themselves in the near future. It is important to look not solely towards aid as means for a more stable Africa, but also at the developments Africans are already facilitating on their own, most notably increased industrialization, improved quality of living, and improved infrastructure. Through these means will Africa become wealthier, more stable, and overall, will further the continent towards its goal of self-sustainability.

Internally displaced persons in the Sudan.
Despite Africa spending over $45 billion annually on infrastructure, it has been estimated that only one in three rural Africans has access to an all-weather road. This dearth of basic infrastructure prevalent throughout much of the continent is inextricably linked to inefficiencies of transporting goods and services; it is estimated that it can take several months for goods to make the trip from Botswana up to Chad or Sudan. Transportation costs increase the price of many goods by up to 75% due to these alarming inefficiencies. 2009 estimates by the World Bank proposed that Africa needs an additional $31 billion annually to fulfill these needs and develop a network of roads across the country to establish  an economically viable transportation system. But roads are only the beginning: adequate railroad systems and an increase in air travel are also paramount to creating a more mobile Africa. By enabling citizens to travel more easily, and by transporting goods and services more quickly, Africa will see itself connected in a way unthinkable two decades ago, and most importantly, this will allow for easier flow of finances and capital from one location to another.
The development of communication technologies is equally important to increased stability in Africa. As of 2010, only 11.3 citizens in Africa had access to the Internet. Cell phone usage, on the other hand, has seen significant increases in the past decade, with only 10 million cell phone users in 2000 rising to over 180 million in 2007. Communication technologies are the key to a more globalized and better-connected Africa. Providing Africans with increased ability to voice opinions, communicate with friends and family, and enable them to communicate more effectively in terms of business will open up many countries to far-reaching business developments and greater inter-connectedness. Communication technologies will help keep the African population better educated, and more up-to-date on current issues such as conflicts, weather, and politics. Furthermore, the ability to reach individuals on the continent by cell phone will increase the effectiveness of organizations such as Doctors Without Borders and UNICEF, as they will be able to keep in touch with patients, communicate more effectively with local politicians and other organizations, as well as communicate more efficiently with those in developed nations.

Johannesburg Stock Exchange, the largest on the continent. Photo by Andres de Wet.
The most difficult question to answer, then, is where does the financing for these projects come from? Unfortunately, it is the countries that most desperately need outside funding that receive the least. War-torn countries, as well as those under strict dictatorships, are less likely to receive funding from investors or aid from other nations due to government corruption and the likelihood that conflict will severely hinder any development projects. USAID focuses much of its resources in Africa, but the amount of money needed to begin working on many projects is significantly greater than what has been donated thus far. Africa and its allies need to focus on a greater reliance on individual investors, such as multi-national corporations and international development consultants. In 2009 the World Bank estimated that every $1 spent on general upkeep of roads in Africa yielded about $4 in assets, a promising figure for some of the private investors looking to contribute financially to Africa. In the past several years, larger mutual fund companies such as T Rowe Price and Vanguard have begun to emphasize Africa as a potentially lucrative investment for many of its clients. As a “frontier market” or “emerging market,” Africa has the possibility to yield extremely high returns, and as more money is invested from developing nations into these funds, Africa will only continue to grow at higher and higher rates.

There is a whole trove of potential wealth hidden away in Africa’s mines, oil deposits, natural gas deposits and vast farmlands. It is unlikely that there will be a period of unencumbered peace throughout Africa within the next decade or two, but that should not be a deterrent when it comes to infrastructural development. Investors and donors alike need to better recognize the importance of such development – in truth, nothing could be a greater step towards stability in the region. Helping establish a foundation for the continent upon which it can begin to foster its own economic development is paramount in this stability, and if the rest of the world wants to see an Africa in ten years with less AIDS, reduced conflict and greater democracy, economic self-sufficiency is the first major step. In turn, the rest of the world may see the fruits of their generosity: in a day and age where oil is scarce, and fossil fuels are rising in price and demand, having a stabilized continent with a virtually untapped network of those resources might have a lasting impact on everyone.

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