Whatever happened to “Africa Rising”? Not so long ago, when investors,
shell-shocked from the 2008 financial crisis, were hunting for the
next big growth story, the idea of a resurgent Africa took hold. After
decades in which the perception of Sub-Saharan Africa had been that of
a continent of poverty, disease, civil war and kleptocracy, from about
2009 a new, more hopeful, narrative began to gain traction.
In this version, instead of being the “hopeless continent” — the title
of a notorious Economist magazine cover story in 2000 — Africa became
the next great investment frontier. Most of its multilateral debt had
been forgiven, growth rates had improved since the turn of the century
and, for the first time, governments were tapping capital markets at
The rosy view was partly driven by demographics. Thanks to a high
birth rate — in many countries 5 or 6 per woman — the population of
Sub-Saharan Africa is likely to double to 2bn by 2050, according to
Hans Rosling of the Karolinska Institute in Stockholm. By contrast,
Europe and the Americas have stopped growing and Asia’s population is
levelling out. African cities were thus said to be brimming with young
aspirants ready to buy branded beer (rather than cheap moonshine),
toothpaste, mobile phones, motorbikes and, perhaps before too long,
cars and houses.
China’s voracious appetite for African oil, copper, iron ore, bauxite
and sundry other commodities pushed up the earning power of countries
from Angola to Zambia. Similarly, its no-strings approach to
investment and construction had pushed down the price of roads, ports
and power stations plus the odd presidential palace.
Africa, according to this more hopeful narrative, was less convulsed
by violence and run by more sensible leaders who held regular
elections and implemented rational economic policies. All of this
opened up the possibility that it could leapfrog a stage of
development by jumping straight from a pre-industrial state to a shiny
new digital world.
“The idea gradually built that Africa was about to become the new
Asia,” says Richard Dowden, executive director of the Royal African
Society in London, and author of The Economist’s “hopeless continent”
article. It was, he says, “absolutely ridiculous”.
That exuberance has evaporated. Nigeria and South Africa, which
together make up more than half of sub-Saharan Africa’s gross domestic
product, are in deep trouble. Nigeria’s petroleum-dependent economy
will be lucky to notch up GDP growth of 3 per cent this year, barely
enough to keep up with population expansion. The naira is under
pressure, foreign exchange is rationed, the budget is strained and a
balance of payments crisis is looming.
South Africa is in even worse shape, convulsed politically, battered
by deep job losses in its struggling mines and facing the real
possibility of a downgrade of its sovereign debt to junk.
Several other African states, especially commodity producers, are
struggling. Angola, which had been pumping out oil and purring along
at double-digit growth rates, has turned to the International Monetary
Fund. Mozambique is in dire straits after squandering much of the
proceeds of international borrowing. The grotesque use by politicians
of windfall profits around the continent is a reminder that corruption
is alive and well.
With a few notable exceptions, such as Kenya, Tanzania, Ethiopia,
Rwanda and Ivory Coast, resurgent after years of civil war, the
picture is similar. In country after country, growth is slowing,
external positions weakening and fiscal deficits widening. In its
semi-annual report, the World Bank forecast growth in Sub-Saharan
Africa of just 3.3 per cent this year, less than half the average of
6.8 per cent recorded between 2003 and 2008. Because of their growing
populations, most African states need nearly 3 per cent growth just to
stand still in per capita terms.
“You’ve gone from huge over-exuberance to uber-pessimism without
anything much in between,” says David Cowan, Africa Economist at
Citibank. That begs the most important question about Africa today. Is
there a sensible view between hope and despair?
In seeking answers, it is helpful to scrutinise the original causes of
optimism. One commonly cited reason for hope was that, after the
turbulent decades that followed independence, many states were at last
becoming better governed. Certainly, with the cold war over, there are
fewer full-blown civil wars in the likes of Angola, Mozambique and the
Democratic Republic of Congo. It has been several years since Africa
has seen anything like the genocide that tore Rwanda apart in 1994.
Still, lower-level conflict remains in South Sudan and Somalia, and
Africa faces a new threat in the form of Islamist terrorism.
On the question of governance, the picture is mixed. Ellen Johnson
Sirleaf, president of Liberia, is part of a supposed new wave of
leaders. “There are many others like me that are going to serve their
time and leave,” she says, referring to expectations that she will
stand down after two terms in 2018. “It’s part of changing Africa.”
Yet the idea of African leaders turning over a new leaf looks less
than convincing. The continent is still full of leaders who have long
clung on to power, including Robert Mugabe, who has run Zimbabwe for
36 years, Cameroon’s President Paul Biya (34 years and counting) and
Yoweri Museveni in Uganda (30 years).
Nor is there much evidence that democratic governments produce better
economic results. Paul Kagame, president of Rwanda, one of Africa’s
best-performing economies, clearly believes that development is more
important than democracy. Already in power for two decades, he has
just had the constitution altered to allow him to hold on to power
until 2034. Ethiopia, a Soviet-style dictatorship, is one of Africa’s
economic success stories.
The conviction that there is a growing African middle class, which has
done most to drive business interest in the continent, is equally
fragile. Vijay Mahajan helped consolidate Afro-optimism with his 2009
book Africa Rising: How 900m African Consumers Offer More Than You
Think. But Mr Mahajan, a US-based marketing professor, built his
thesis on less-than-robust advertising classifications of spending
Many of his “middle class” were scraping by on a few dollars a day in
insecure jobs. Mr Mahajan sticks to his optimistic account but admits
that the book’s iconic title was a concoction of his publisher,
Pearson, former owner of the Financial Times.
It is true, as Mr Mahajan argues, that official data underestimate
African wealth, much of it hidden in the informal, untaxed economy.
Some multinationals have done well by catering to a new strata of
consumers. Anheuser-Busch InBev is paying $71bn for SABMiller largely
on the basis of its lucrative African brewing operations. Even in the
midst of Nigeria’s current woes, Coca-Cola paid $240m for a 40 per
cent stake in CHI, a juice maker.
Yet Africa’s middle class is fragile. Many well-paid jobs are in the
bloated public sector, funded by governments that may no longer be
able to afford such expense.
In recent years, consumer goods companies have been forced to chase
their customers downmarket, offering them smaller packet sizes (the
two-cigarette pack has hit the streets of Harare) or economy brands to
keep cash-strapped customers loyal.
Perhaps the biggest flaw in the middle class story is that, with a few
exceptions, Africa hardly makes anything. For too many countries, the
economic model continues to be to dig stuff out of the ground and sell
it to foreign companies.
Moeletsi Mbeki is an academic and younger brother of Thabo Mbeki, the
former South African president and a strong proponent of the Africa
Rising thesis. Moeletsi argues, conversely, that few countries have a
strategy to match Asian economies, such as Taiwan and South Korea,
which built prosperity on manufacturing and exports. “Yes, African
economies are getting more sophisticated,” he says. “But Africa is
still not yet in the manufacturing age.”
An exception is Ethiopia, which has turned a command economy-style
commitment to production into fast growth, though perhaps not quite as
fast as official data suggest. It has attracted textile manufacturers
from Turkey and shoemakers from China and turned Addis Ababa into a
bustling hub. With 90m people, Ethiopia has scale. That cannot be said
for a lot of other nations. Rwanda, in some ways a bright spot, has a
GDP of just $8bn, smaller than the London borough of Ealing.
The one country with true scale is Nigeria, with 180m people. Kingsley
Chiedu Moghalu, a former deputy governor at its central bank, argues
that rock-bottom oil prices are just the spur his country needs
finally to diversify and become a manufacturing force. Yet Nigeria is
not even at the starting line. The country, home to 2.5 per cent of
the world’s population, has just 0.1 per cent of its installed
electricity capacity. It has expensive labour, an overvalued currency
and a business class skilled at making money through arbitrage and
rent-seeking. Muhammadu Buhari, its president, says he is against
devaluing the naira because Nigeria has nothing other than oil to
It is not all bleak. Some African countries have built dynamic
economies without relying on commodities. Kenya has been a pioneer in
its use of technology. Its M-Pesa mobile money system, now a decade
old, has produced an increasingly cashless economy, drawing everyone
from city-dwellers to Maasai pastoralists into its network and vastly
improving business efficiency.
The emergence of China, even one less hungry than it was for
commodities, has been a game-changer, most obviously through the
improvement of Africa’s infrastructure. The continent’s paved road
network has grown by 7,500km a year for the past decade, according to
the African Development Bank. Go almost anywhere in Africa, and
Chinese companies are building roads, ports and office blocks.
In the end, though, success stories are too rare and progress — both
economic and political — too fragile, to be confident that Africa has
“Africa has always been valued for its commodities, whether it’s gold
or diamonds or slaves,” says historian Martin Meredith. “‘Africa
Rising’ was based on the Chinese being prepared to trade heavily to
get their hands on those raw materials.”
That phase is over. Unless governments can build sustainable growth
models less dependent on commodities and based more on adding value
domestically, the ‘Africa Rising’ story will be just that: a story.
IMF called in as slowdown bites
Few African countries have seen their fortunes rise and fall as
spectacularly as Angola in the wake of the drop in commodity prices.
Following the 2002 ending of a brutal civil war, Africa’s
second-largest oil producer embarked on a massive spending spree as it
sought to rebuild a devastated nation and ratchet up crude production.
Luanda spent about $15bn a year building roads, sewerage systems and
other infrastructure, it attracted increasing levels of foreign
investment, particularly from China, Portugal and South Africa, and
recorded some of the fastest growth in the world.
Its economic success was blighted by accusations that the autocratic
regime of President José Eduardo dos Santos was using the country’s
hydrocarbons wealth to enrich a politically connected elite at the
expense of the impoverished masses. Throughout the oil boom, little
was done to diversify the economy, meaning that when crude prices
collapsed the government was forced to dramatically slash its budgets.
When flush with petrodollars, state spending was the main driver of
growth. But as that source of finance — which last year accounted for
95 per cent of export earnings and 52 per cent of revenue — began to
dry up, projects were halted, jobs axed and business faced a foreign
This month, Angola, which enjoyed double-digit growth during the boom,
turned to the International Monetary Fund for a potential bailout,
with a request for a three-year programme.
Eurasia Group said at the time that turning to the IMF shows both
Angola’s “desperation in the face of the oil shock and a willingness
to undertake tough reforms”. But the research group warned that the
country’s economic problems “do not lend themselves to quick fixes”.