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Africa's best time is ahead

By Berhan Ahmed - posted Friday, 7 September 2012

For the first time in history, African countries have enjoyed a period of strong and sustained growth. The booming African economy has transformed the prospects for ordinary Africans across the continent. According to The Economist, six of the fastest growing economies in the world - Angola, Nigeria, Ethiopia, Chad, Mozambique and Rwanda - are in Africa. Investment in Africa gives greater returns than in any other developing region of the world. The growth in Africa as a whole from 2000-2010 was a little behind Asia, but India and China account for most of that growth. During the next five years, economic growth in Africa is expected to outpace Asia, and it is expected to lead the world in economic growth for the next twenty years. Africa is not only riding a resources boom, but is also successfully building capacity in manufacturing, especially textiles and clothing, light industry, and some areas of export in agricultural products. The agricultural sector has also grown at a moderate rate and this growth has contributed significantly to a reduction in poverty for many African countries. Over the past ten years, overseas investment in Africa has grown from $9 billion to $67 billion. Australian companies have $20 billion invested in Africa, mostly in the mining sector, which is a substantial share of that total.

The popular perception of Africa has not caught up with that change. Many still see Africa as a giant cripple; a continent of cruel dictators and unstable governments; a continent over which the Four Horsemen of famine, plague, war and death range with unhindered rapacity. Really, this impression came from the 1980's. From 1980 until the late 1990's, the GDP per capita for most countries in Africa dived as against the GDP of the Asian economies. The reasons for this are complex, but part of the reason for it was the 'Lifeboat Theory', which gained much ground and many supporters from 1974. This theory essentially held that a triage approach should be taken to world economies; that some countries were doomed and no attempt should be made to save them. In one sense, Africa was abandoned. This enabled one of history's greatest wars, almost unreported in the Western press, to ravage the entire top of the continent - driven to a large extent by munitions suppliers, merchants of death, unregulated and allowed to operate with complete international impunity. The African economies complained that while the developed countries were prepared to intervene in the Yugoslavian genocide, cries for help in Rwanda, Somalia and many other places went unheard; millions were slaughtered while powerless and underequipped United Nations missions looked on helplessly. The Lifeboat Theory would be laughed at as ridiculous nowadays. We know that the world is a unity. No part of it can be abandoned: what affects one country will spill over, very swiftly, to everywhere else.

There is no doubt that this present African growth is being driven by China. This is a trickle-down effect that has been going on now for fifty years and is an example of how one economy can lead an entire continent. After the Second World War, high labour prices in the USA combined with technological innovation in Japan made the latter an economic powerhouse. Who could now believe that the term 'Made in Japan' was not so long ago a term for poor-quality, shoddy merchandise? When labour prices had risen in Japan, manufacturing flowed first to Korea, then after the instability of the Mao years to China, and more recently to Thailand. Now China is looking towards Africa. We, whose economy has been driven by China and Japan for sixty years, are now also looking the same way.


This boom is commodity-driven. Minerals of all types are a significant component of these commodities, but most of all rare earths such as Gadolinium and Coltan which are vital for computers, mobile phones, and a whole range of technological devices of which China is the largest producer. The continent is believed to hold 90% of the world's cobalt, 90% of its platinum, 50% of its gold, 98% of its chromium, 70% of its tantalite, 64% of its manganese and one-third of its uranium. China is the biggest customer for these, purchasing about 90% of African production, and is building and holding huge stockpiles of them. This is historically a characteristic Chinese strategy, but so is economic development of the countries that they are sourced from. A large part of Western imperialism and, even now, capitalist economics, has used the tactic of asset stripping, bleeding a country for everything that can be got. China, on the other hand, has tended to develop stable economies, building a bigger cake and creaming off the top 10%. China well knows the dangers of a mono-economy. At least some of the money that is earned is always put back into growth, and this is why Africa is developing a larger manufacturing base, built on Chinese expertise. But China does not have a strong commitment to fair employment practices nor to democratic states.

Australian money has followed the Chinese example. Most of our income, and the reason for the continuing strength of our economy, is our resources base. The Chinese might want African minerals, but they don't have the expertise to run mining operations in third world countries. Australia does. Australia probably has the biggest investment in Africa, percentage-wise, of any country. According to the Australian newspaper, 'One in 20 Australian-listed companies has an investment in Africa and there are 200 Australian companies involved in 650 projects in 37 countries in the region.' Though the government as usual lags behind business, the Australian government is increasing the numbers of embassies and diplomatic contacts, and we must also remember the 13,000 African students studying here.

Even the 'basket case' countries are not intrinsically poor. The worst cases are Eritrea, Sudan, Somalia and Congo. Even these economies are growing. Since antiquity Eritrea has been a primary world source for gold and this accounts for substantial Australian investment. Sudan has huge amounts of oil that amount for over 90% of the country's income. Congo has diamonds and rare earths, particularly Coltan, a necessary component of mobile phones, DVD players, video game systems and computers. Somalia has a fairly healthy agriculture-based economy, but large untapped resources of uranium, metals, natural gas and probably oil. Despite the present instability, it seems likely that over the next decade these countries will settle down. Unstable countries have potential to drag down their regions, but, as Japan shows, the opposite also applies. Countries like Ethiopia bring stability and security to the whole region. The lack of infrastructure in these countries is actually a plus. Australia is facing a vast economic cost to replace a still essentially Victorian rail and telecommunications infrastructure. African countries can avoid such need for upgrades and move directly to the installation of new technology.

It is important that we don't get too hung up on commodities. The Chinese strategy of stockpiling may not succeed. Europe and the USA are devoting increasingly large research resources to finding ways to replace the need for rare earths and oil. Climate Change will also impact heavily on Africa. Australia is in an excellent position to partner with Africa and to exploit the expected economic growth. Our investment in developing educational resources will also pay dividends. But our own manufacturing is not strong, our agriculture is a mixture of very advanced and hopelessly outdated, protectionist practices, and our research commitment is frankly appalling, about the worst of any developed nation. Our water management practices are extremely poor and our commitment to carbon emission management is relatively about the worst in the world. Even with resources prices plummeting at present, we are still in a position to retain a strong economy on the basis of shared exploitation of Australian and African resources for perhaps twenty years. But after that, the strength of our economy will depend a great deal on whether we develop these weak areas.

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About the Author

Dr Berhan Ahmed is chairperson of the Africa Think Tank, based in Melbourne.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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