A few months ago we considered “Africa’s Economic Rise: Fact or Fiction.” Today, it seems that data on Africa’s growth are as optimistic as ever. However, security concerns continue to plague the continent. Case in point: Nigeria. In the same month that the country overtook South Africa as the largest economy in Africa, the extremist group Boko Haram carried out a large attack at a bus station in the Nigerian capital of Abuja. Ian Birrell writing for the Wall Street Journal contextualizes Nigeria’s security concerns and economic hopes, “Africa is Refuting the Usual Economic Pessimism”:
The terrorist bombing that killed 71 people in Nigeria’s capital in mid-April abruptly turned attention from what had been remarkable news. Nigeria became briefly the world’s fastest-growing economy following an overnight transformation on April 6 when the West African nation discovered that its economy had almost doubled in size, with a gross domestic product of $510 billion in 2013. Africa’s most populous country suddenly also has by far the continent’s biggest economy (South Africa’s GDP trails at $384 billion) and has jumped 12 places in global rankings, landing just short of the G-20.
This transformation was achieved by the magic of statistics rather than by any economic miracle, based on the modernization of data collection. While most developed countries reset calculations of GDP about every five years to reflect changes in consumption, Nigeria had failed to do so since 1990. So previous figures excluded the explosion in mobile telecoms in Nigeria, despite 128 million subscribers, and a fast-expanding entertainment sector that is its second-biggest employer.
The gruesome bombing captured headlines, of course. Nigeria faces a grinding struggle against the Islamist terror group Boko Haram, the likely perpetrators of the carnage in Abuja. But it would be a shame if the explosion overshadowed the pace of change in Nigeria, which reflects a broader economic transformation under way in much of Africa.
For too long, a self-serving alliance of Western aid groups, politicians and journalists presented sub-Saharan Africa as a dangerously failed place in need of outside salvation. They offered only corrosive images of conflict, poverty and disease, leaving tourists scared to visit and making fearful businesses slow to engage. The real story is rather different: It includes the stuttering spread of democracy, impressive economic growth and a continent that now has more people who are overweight than go to bed hungry each night.
Nigeria, which accounts for one-quarter of Africa’s economy, underlines this complex new narrative. It is a remarkably entrepreneurial nation, perhaps one legacy of political failures and state inadequacies. The huge increase in GDP was largely driven by a thriving service sector and, increasingly, by manufacturing. Africa’s richest man, Aliko Dangote, is a Nigerian cement and food supplier. The oil and gas industries that traditionally propped up the economy contribute only 14% of GDP.
The country remains scarred by sectarian conflict, stymied by corruption and riven with poverty. Although Nigeria now has the world’s 24th-largest economy, its estimated 170 million people remain outside the top 100 in GDP per capita, and the rebased GDP figures reveal worryingly low tax revenues. But the superrich have made it Africa’s biggest market for private jets, and an emerging middle class fuels one of the world’s fastest-growing markets for champagne and cognac. Meanwhile, its dynamic movie industry, known as “Nollywood,” turns out 1,000 films a year and has the world’s third-highest revenues behind the U.S. and India.
Goldman Sachs predicts that Nigeria’s economy will be bigger than Canada’s or Italy’s by 2050—and not far behind Germany’s. And this is just one of 54 countries on a large continent that is home to six of the world’s 10 fastest-growing economies and the youngest population on the planet. The same rapid evolution is visible in Ethiopia, Ghana, Kenya, Mozambique or Tanzania. Already Africa has a bigger middle class than India, driving the consumer spending that powers this economic swelling. Contrary to popular conception, the majority of Africa’s most rapidly expanding nations do not rely on natural resources.
Yet as millions of households gain discretionary spending power, they are confronted by poor public services and the paucity of pensions. As usual, capitalism and consumerism are driving change. Prudential, the British insurance giant headed by an African-born chief executive, recently bought a Ghanaian group that provides protection to people living on less than $2.50 a day. In Kenya and Nigeria even poor parents often opt for private teaching rather than rely on second-rate state schools, undermining all that aid-lobby boasting about free education. African geeks are coming up with technological solutions to circumvent problems such as poor infrastructure, counterfeit medicines and the lack of banking services. Some of the solutions, such as Kenya’s famous mobile-money system, M-Pesa, are worldbeaters.
Even if the overnight expansion of the Nigerian economy was a statistical quirk, there is nothing illusory about the rapid growth and rampant change across the continent. Profound problems remain, as in other parts of the world—but much of Africa stands on the brink of takeoff comparable to China’s. Those who fail to see this are likely to regret their anachronistic attitude. (Wall Street Journal)
The Economist presents an insightful counter-argument to the optimistic look of Nigeria’s new position in “Africa’s New Number One”:
HEY PRESTO: as if by magic, Nigeria has declared itself the biggest economy in Africa. Overnight, with the wave of a statistical wand, it has added 89% to its GDP, now worth $510 billion, and soared past the previous leader, South Africa, worth $370 billion. Nothing has changed in Nigeria’s real economy, except the way it is measured. Yet the magic matters.
The GDP revision is not mere trickery. It provides a truer picture of Nigeria’s size by giving due weight to the bits of the economy, such as telecoms, banking and the Nollywood film industry, that have been growing fast in recent years (see article). Other countries perform similar statistical magic—Ghana, for example, added 60% to its economy in 2010—though few wait two decades, as Nigeria inexcusably did, to update the national accounts. In Nigeria’s case, the new numbers confirm that it really is the colossus of the continent.
But the new GDP figures also provide a useful reminder of what must change. The clearest lesson is for sluggish, complacent South Africa, which has long taken its status as the continent’s giant for granted. With Nelson Mandela dead, it looks ever less like a rainbow nation. The ruling African National Congress is tainted by corruption: President Jacob Zuma is trying to explain how the state spent $24m on his private home (see article). Without economic and political reform, it will slip further behind. But Nigeria, too, has plenty to do.
Size isn’t everything
The country may be a giant, but it is still poor: Nigeria ranks 153rd out of 187 countries in the UN’s Human Development Index. Despite the rapid growth of recent years, unemployment remains high and the number of people in poverty has actually increased.
To achieve that needs reforms of the sort that President Goodluck Jonathan has, with the big exception of electricity privatisation, largely failed to bring about. He should attack corruption: instead, he sacked the central-bank governor who raised the alarm over billions of dollars in oil revenues missing from the state coffers. Tax-collection is woefully inadequate; the bigger GDP number shows tax revenues to be even smaller as a share of the economy than previously thought. And the barriers to doing business are formidable, from bureaucracy and graft to port delays and murky land rights. Foreign companies that tough it out in Nigeria—the likes of Shoprite stores, Nestlé for food and SABMiller in booze—have shown they can prosper. Even so, it is not a place for the faint-hearted.
So let Nigeria celebrate its new-found status for a moment. And then let it get on with the task of living up to being Africa’s Number One. (The Economist)
Regardless of the economic prospects, largely benefiting the Christian South, Boko Haram’s five-year insurgency is only becoming more lethal and continued attacks by the group are leaving the Nigerian military overstretched. As Voice of America reported recently, “Boko Haram Increases Deadly Attacks on Civilians in Norther Nigeria”:
The militant group known as Boko Haram has waged a nearly five-year insurgency in northern Nigeria. The government launched a military offensive against the sect in May 2013, but attacks against civilians have intensified, leading some to wonder what Boko Haram really wants and whether the insurgency has spun out of control.
Boko Haram’s response to the now 10-month-long military offensive has included an increase in attacks on civilians. Militants have raided villages, slaughtered travelers on the highway and mowed down teenagers in school dormitories.
The governor of Borno state said in March Boko Haram is “better armed and better motivated” than the Nigerian military. The question is: motivated by what?
The radical sect was founded in the early 2000s with the goal of bringing “pure” Islamic rule to the Muslim-majority northeast.
But the brutality of the past year raises the question: Is this a fight for a cause or is it just a murderous rampage?
“That’s the question everybody is asking,” said Fredrick Nwabufo, a Nigerian newspaper columnist and social commentator. “What does Boko Haram want?”
Some say years of corruption and deepening poverty have fueled the sect. But he argues that Boko Haram was born out of what he calls the “ultra-religiousness” of Nigerian society.
He doesn’t think they have lost sight of their original goals, despite what he calls their more “aggressive tactics.”
“Now they are trying to bite anyway they can,” said Nwabufo. “That is what we are seeing, but it doesn’t change the fundamental thing that Boko Haram is fighting for… They are fighting for control. That is what they want. They believe that sharia law should be the rule, should be what guides Nigerians, should be what the state should live by.”
Nigeria’s military has painted Boko Haram as increasingly disorganized and “on the run.” Analysts tell VOA otherwise. They say the pattern and organization of attacks over the past year indicate an intact command structure.
Boko Haram always has been a constellation of factions and cells — some more moderate than others, some closer to al-Qaida and with more “international” jihadist agendas. A splinter group, Ansaru, has kidnapped and killed Westerners.
And yet, so much about Boko Haram is simply not known. (Voice of America)
Looking at Africa more broadly, several excellent reports were recently released looking at the continent’s prospects. First, the World Bank released it’s biannual analysis of Africa’s economic future in the new Africa’s Pulse (Podcast here!) Excerpts of a summary of the report is included below:
Economic growth in Sub-Saharan Africa (SSA) continues to rise from 4.7 percent in 2013 to a forecasted 5.2 percent in 2014. This performance is boosted by rising investment in natural resources and infrastructure, and strong household spending, according to the World Bank’s new Africa’s Pulse, a twice-yearly analysis of the issues shaping Africa’s economic prospects.
Growth was notably buoyant in resource-rich countries, including Sierra Leone and the Democratic Republic of Congo. It remained steady in Cote d’Ivoire, while rebounding in Mali, supported by improved political stability and security. Non-resource-rich countries, particularly Ethiopia and Rwanda, also experienced solid economic growth in 2013.
Capital flows to Sub-Saharan Africa continued to rise, reaching an estimated 5.3 percent of regional GDP in 2013, significantly above the developing-country average of 3.9 percent. Net foreign direct investment (FDI) inflows to the region grew 16 percent to a near-record $43 billion in 2013, boosted by new oil and gas discoveries in many countries including Angola, Mozambique, and Tanzania.
With lower international food and fuel prices, and prudent monetary policy, inflation slowed in the region, growing at an annual rate of 6.3 percent in 2013, compared with 10.7 percent a year ago. Some countries, such as Ghana and Malawi, have seen an uptick in inflation because of depreciating currencies. Remittances to the region grew 6.2 percent to $32 billion in 2013, exceeding the record of $30 billion reached in 2011. These inflows, combined with lower food prices, boosted household real incomes and spending.
Tourism also grew notably in 2013, helping to support the balance of payments of many countries in the region. According to the UN World Tourism Organization, international tourist arrivals in Sub-Saharan Africa grew by 5.2 percent in 2013, reaching a record 36 million, up from 34 million in 2012, contributing to government revenue, private incomes, and jobs.
“High-quality university programs in Africa, particularly in areas such as the applied sciences, technology, and engineering, could dramatically increase the region’s competitiveness, productivity and growth,” says Makhtar Diop, the World Bank Group’s Vice President for Africa. “ Strategic reforms are needed to expand young people’s access to science-based education at both the country and the regional level, and to ensure that they graduate with cutting-edge knowledge that is relevant and meets the needs of private sector employers.”
Risks to fast growth remain
Africa’s Pulse notes that while GDP growth in the region is expected to remain stronger than in many other developing countries worldwide, a number of important risks remain.
Commodity prices –weaker demand for metals and other key commodities, combined with increased supply, could lead to a shaper decline in commodity prices. In particular, if Chinese demand, which accounts for about 45 percent of total copper demand and a large share of global iron ore demand, remains weaker than in recent years and supply continues to grow robustly, copper and iron ore prices could decline more sharply, with significant negative consequences for the metal-producing countries.
Locally volatile food prices —within Sub-Saharan Africa, strong local price pressures have emerged in a number of countries driven in part by large currency depreciations, as in Ghana and Zambia, and also by unfavorable weather conditions.
Political uncertainty —domestic risks associated with social and political unrest, and emerging security problems, remain a major threat to the economic prospects of a number of countries in the region.
In a special analysis of the region’s growth and trade patterns in Africa , Africa’s Pulse says that export diversification remains a tough challenge for many African countries, especially oil producers.
Trade in services is untapped
Africa’s Pulse notes that globalization of services is a potentially important source of growth for developing countries. Technology and outsourcing are enabling traditional services to overcome their old constraints such as physical and geographic proximity.
Has Sub-Saharan Africa tapped this potential? At over $50 billion, the region’s services exports trail all other developing regions; however, it is expanding annually at about 12 percent, on average. (The World Bank, Africa’s Pulse)
The issues of economics and security go hand in hand with governance, especially in the presence of corruption and democratic transition. Two other reports worth highlighting are the 2013 Index of African Governance and a recent Afrobarometer Policy Paper, which quantitatively indicates that Africa’s willing taxpayers are thwarted by opaque tax systems and corruption.
2013 Ibrahim Index of African Governance (IIAG)
Established in 2007, the IIAG is the most comprehensive collection of quantitative data on governance in Africa. Compiled in partnership with experts from a number of the continent’s institutions, it provides an annual assessment of governance in every African country. The IIAG provides a framework for citizens, governments, institutions and business to assess the delivery of public goods and services, and policy outcomes, across Africa.
Its publication comes in an important year for Africa as we celebrate the 50th anniversary of the founding of the Organisation of African Unity. The Union’s creation marked a milestone in our continent’s development. Its anniversary provides an opportunity to reflect on progress made over the last half century and, crucially, to refocus on what still needs to be achieved to meet the bold ambitions of its architects.
The findings highlight widespread improvements across the continent since the turn of the century. They show that 94 per cent of people living in Africa now live in a country that has demonstrated overall governance improvement since 2000. Eighteen out of the 52 countries analysed saw their best ever performance in this year’s IIAG. But these figures, of course, also reveal the challenges of sustaining progress and underline that an equitable allocation of resources must be a priority for policy and decision makers. This appears clearly when performance since 2000 is examined at category level. There has been evident improvement across Africa in Human Development and Sustainable Economic Opportunity as well as, to a lesser extent, in Participation & Human Rights. But average scores in the Safety & Rule of Law category have declined. If this deterioration is not turned around, it could signal an era where, despite fewer regional conflicts, we will see an increase in domestic social unrest across Africa. (2013 Ibrahim Index of African Governance)