Wednesday, May 19, 2010

Africa: An economic giant that’s ready to wake up by Geoffrey York

Africa’s newest architectural miracle is a gigantic stadium in the earthy colours and shape of a calabash, the traditional cooking pot that symbolizes African village life. At night, on the Soweto horizon, it glows like the embers of a slumbering fire, waiting to be stirred into life.

On June 11, the embers will awaken. Nearly 90,000 people will crowd into Africa’s biggest stadium, known as Soccer City, for the opening ceremonies of the World Cup, the most popular sporting event on the planet, held on African soil for the first time ever.

History will approve.

The stadium was built in the apartheid era as a soccer venue, mostly for South Africa’s black population, and it was here that Nelson Mandela spoke to 100,000 adoring supporters in his first Soweto rally after his release from prison. With apartheid long dead, the stadium has sat empty for three years as workers overhauled it for Africa’s new day in the sun.

The renaissance of Soccer City marks an auspicious beginning for an era when another sleeping giant, Africa itself, is being reborn. After a year hobbled by the global slowdown, Africa is quietly preparing for a growth trajectory that could astonish the world.

Its popular image is still the same: hunger; corruption; war; poverty. But take another look. Beyond the stereotypes, Africa’s potential is explosive. Its human talents, its vast natural resources, its rising democracies and new technologies – all are reaching a tipping point that could send it surging dramatically upward.

The economy of sub-Saharan Africa is projected to grow by 4.75 per cent this year, faster than the world average, and will accelerate to an impressive 6 per cent in 2011, according to the International Monetary Fund. It will be the strongest recovery that Africa has ever managed to achieve after a global downturn, and it is testament to its greater resilience, smarter policies and growing popularity among foreign investors.

Little noticed by the world, the African economy had grown at 6 per cent annually for five years before the global slowdown. Its inflation rates and budget deficits have declined, its foreign exchange reserves have grown 30 per cent since the 1990s, and its external debt has sharply decreased. And so, when the global economy contracted last year, Africa succeeded in avoiding a decline, maintaining 2-per-cent growth even at the depths of the slowdown.

Africa’s rebirth has often been touted in the past, only to falter. Magazine covers in the late 1990s touted “Africa Rising” and “Emerging Africa.” Leaders such as U.S. president Bill Clinton toured the continent, and South African president Thabo Mbeki made passionate speeches about the “African Renaissance.” But soon the optimism was fading, and a disillusioned cover story in The Economist a decade ago dismissed Africa as “The Hopeless Continent.”

But this time is different. For the first time, Africa is becoming a bigger lure for investors than for aid donors. Africa’s poverty rate has been declining by 1 per cent annually since the 1990s, and investment is growing dramatically. A decade ago, Africa was receiving less than $5-billion (U.S.) in foreign investment annually. By 2008, it was attracting nearly $40-billion in direct foreign investment – more than it received in foreign aid. One survey found that 40 per cent of emerging-market equity investors are putting money into Africa today, compared with 4 per cent in 2006.

“I think there are great opportunities in Africa,” says Richard Maponya, one of South Africa’s most well-known black entrepreneurs, who capped a 60-year business career by building a massive $90-million shopping mall in Soweto three years ago.

“We’re growing every day,” he said in an interview. “Ever since we put up the mall, property prices have gone up, and the lifestyle of people has become much better. There are a lot of wealthy black people in Soweto, and there’s a big growth in the middle class. They call Soweto home, and they’re not excited about moving to the white suburbs.”

Under apartheid, Soweto was notorious as a place of rebellion and violence. The sprawling black township was the site of the 1976 uprising that ignited the final battle against the apartheid system. But many of its two million inhabitants today are middle-class consumers, and savvy entrepreneurs are recognizing it as a place to make money.

On the township’s famed Vilakazi Street, where Nelson Mandela once lived in a small brick house, two businessmen have created popular restaurants that lure thousands of tourists and local customers. Both are rapidly expanding their businesses in time for the World Cup.

Mr. Mandela, in fact, has signalled the business revolution in Soweto by giving strong support to its entrepreneurs. Seventeen years after his speech at the soccer stadium, he returned to Soweto to cut the ribbon to open the Maponya Mall. Since then, the mall’s 200 shops have been surprisingly successful. Even in the depths of the 2009 downturn, its revenue grew by 5 per cent. Among the mall’s luxury tenants are an Audi dealership, a sushi bar, a boutique selling Prada and Versace sunglasses, four jewellery shops, and a cigar store where customers buy $30 Cubans.

Across Africa, pro-business policies are much more common. A survey by the World Bank found that 28 African countries had adopted 58 business-friendly measures last year – more than in any previous year. African stock exchanges are bustling, from Johannesburg to Nairobi to Accra. The continent has more than 1,000 banks and other financial institutions, including the hugely successful Ecobank, based in Togo, which has been consistently profitable and has 11,000 employees in more than 750 branches across 29 African countries.

Some of Africa’s economic advantages are obvious. It contains 30 per cent of the world’s mineral reserves, including 40 per cent of the world’s gold, and is one of the biggest sources of the oil that fuels the U.S. and Chinese economies. Lured by these resources, many foreign investors are abandoning their hesitations about the region. Canadian mining companies, which had invested less than $1-billion (U.S.) in Africa in the 1990s, have now poured $21-billion into the continent.

China is the most ardent of the new suitors. By 2008 its official investment in Africa had reached almost $8-billion (U.S.), but some estimates say its investment is closer to $50-billion if loans and other contributions are included. Its annual trade with Africa has soared from a mere $2-billion in 1999 to a stunning $107-billion by 2008, putting it in close competition with the United States as Africa’s biggest trading partner, and offering a strong alternative to the usual sources of funds for African business.

Vijay Mahajan, a marketing professor and business consultant who published a book on Africa last year, argues that Africa is following the same economic path as China and India and will offer the same business opportunities. Many of its countries already have a higher per-capita income than China and India, he notes. “Africa is richer than you think,” he tells readers in Africa Rising.

Even the continent’s fast-growing population may be an advantage, rather than a burden. Africa’s population has recently surpassed one billion. By 2050, it could reach two billion people, a fifth of humanity, thanks to a rapid decline in mortality rates. But its birth rates are also dropping fast, so its working-age population over the next two decades will have fewer dependants for which to care. This is the kind of “demographic dividend” that helped fuel the economic miracle in the Asian Tigers of the past 20 years.

What’s equally significant about Africa’s renaissance is the growing importance of new technologies, including cellphones, Internet businesses and mobile banking. Since 2003, Africa’s use of cellphones and the Internet has been growing at twice the global average. A decade ago, there were only 3 million Internet users and 11 million cellphone subscriptions in the whole continent. By 2009, the number of Internet users had increased to 86 million, and there were 400 million cellphone subscriptions. By 2012, there are expected to be more than 500 million cellphone subscriptions – more than half of Africa’s entire population, compared with 2 per cent a decade ago.

Businesses are seeing the profit potential in Africa’s telecommunications sector. In one of the most spectacular of recent deals, Indian company Bharti Airtel spent $9-billion (U.S.) this year to acquire Zain’s cellphone operations in 15 African countries. The company said the deal was justified by the continued likelihood of high growth in Africa.

The lure of Africa is boosted by new African-based technologies that are beating the world. Mobile banking, for example, is increasingly popular in many African countries, even as the technology has yet to arrive in Canada in any significant way. By using their cellphones to transfer money and pay bills, Africans are making a big dent in their transportation costs, a major cost savings for rural people and the urban poor.

In Kenya, for example, more than 9 million people – about 40 per cent of the adult population – use their cellphones to make financial transactions through SMS text messages, thanks to a service called M-Pesa (its name based on the Swahili word for money). The service was created just three years ago by Safaricom, the country’s leading cellphone company, and already is providing an average of $320-million (U.S.) in monthly transactions.

A similar service, called Wizzit, has signed up more than 300,000 customers in South Africa, providing a virtual bank account for poor and rural people who feel excluded from regular banks. Its slogan is “My bank in my pocket.” The company is so successful that it is expanding into several other African countries, including Zambia and Tanzania, and even into European countries such as Romania.

Another of Africa’s technological innovations is Ushahidi (a Swahili word meaning “testimony”), an Internet mapping tool with global applications, created in Kenya in 2008 in the aftermath of election violence there. Its crowd-sourcing technology allows people to report anonymously on any phenomenon, creating instantaneous maps that are invaluable to the search for solutions. Ushahidi has helped create maps of election fraud in Sudan, medical shortages in several African countries, and the location of trapped earthquake victims in Haiti and Chile, allowing a faster response by rescue workers.

If Africa’s business opportunities are rapidly expanding, what about its stereotypical problems of poverty, disease and corruption? Those challenges haven’t disappeared, but there is much more progress than most outsiders realize.

Corrupt leaders and autocratic regimes are still commonplace in Africa. Yet multiparty elections are increasingly frequent. By some measurements, there are nearly 30 democracies in Africa today, compared with five at the end of the Cold War, and the number of civil wars has sharply declined. One index of African governance – measuring everything from transparency and human rights to wealth creation and education – found that 38 countries had improved their score over the past decade, while only 10 had declined.

Some of the most dramatic gains are in health and education. Africa’s child-mortality rate is declining by 1.8 per cent annually – twice the rate of decline in the 1990s – due to expanded vaccination campaigns, improved nutrition and greater access to clean water. Malaria rates are sharply falling as millions of insecticide-treated bed nets are distributed across Africa. Adult death rates have improved steadily since 2005, partly because of much better access to AIDS medicine.

Literacy has expanded enormously in Africa since the 1970s. A decade ago, only 58 per cent of African children went to primary school; today it’s nearly 75 per cent. Many African countries have eliminated school fees and other barriers, allowing an extra 42 million children to go to school.

High-school graduation rates have been tougher to improve, but look again to Soweto for an inspiring example. Mduduzi Mathe is the son of poor teachers who earned a few dollars a month in the apartheid era. He remembers how Soweto’s schools were neglected back then. “You’d see students without shoes, sitting on buckets,” he says. “You’d see a classroom without window panes or a proper door.”

When he became principal of Bhukulani Secondary School in 1997, the school was on the verge of collapse, with dilapidated classrooms, broken windows, drug dealers in control of the building, and only 21 per cent of students passing their matriculation exams. But Mr. Mathe, a science and mathematics teacher who had moved into a house within a short walk of the school, worked hard to instill a new sense of discipline and leadership.

He announced a verbal contract with the staff and students, insisting on explanations from anyone who was even a few minutes late. He found more resources for textbooks and equipment. He spent weekends with students at the school, painting the walls and fixing the broken windows. And by 2009, an astonishing 94 per cent of his 1,200 students were passing their exams. Every year on opening day, hundreds of parents gather at his school gate to clamour for admission for their children – although he has to turn most of them away because of a space shortage.

On a typical recent day, Mr. Mathe was giving a stern lecture to a teacher who was seven minutes late. “If there’s a lack of discipline among the staff, it spills over to the students,” he said in an interview. “We pride ourselves on being here on time. I’m devoted to seeing our learners getting better every day.”

But it’s not just a matter of discipline. He also conveys a sense of the joy of education. On a wall board in a school corridor, he has scrawled an explanation of the laws of probabilities – and how they can be applied to the South African team’s chances of winning the World Cup this year. He, too, is waiting for Soccer City to come alive.

No comments:

Post a Comment