A recent survey compiled by “the African Development Bank, the United Nations Development Program and the Organization for Economic Cooperation and Development,” paints a generally sunny view of Africa’s near-term economic future.
Economic output for the whole of the continent is expected to grow by 4.3% this year and 5.7% in 2015, but East and West African regional economies are set to grow significantly faster than other regions…
…Foreign aid as a proportion of total foreign capital inflows to Africa was set to decline to about 26% in 2014 from 30% the year before, the report said. But foreign aid will continue to increase this year, to about $55 billion, and the poorest African nations rely on it to survive. __ Wall Street Journal
As always, most overseas investment in Africa is based on natural resource development of oil, gold, diamonds, uranium, etc. But the rapid demographic growth of several African countries — particularly African cities — is driving an increasing amount of new investment.
“Africa’s stronger investment attractiveness is best explained by its own sustained growth rates in the context of slower global growth. Africa’s growth prospects are likely to remain solid, as an urbanizing and rising middle class drives demand for consumer products and improved services.”
Africa’s cities are now emerging as the hotspots of economic and investment activity on the continent. Nearly 70% of respondents stressed the significance of cities and urban centers in their investment strategy in Africa. __ Mining
Investors and investment funds seem to be basing recent Afro-optimism on a historical connection seen in other continents between abundant cheap labour, and profitable manufacturing.
China is one of the manufacturing nations that is taking an interest in the current rise in numbers of low-wage young workers in Africa.
Faced with rising labor costs at home and negative perceptions about their employment practices in Africa, Chinese companies are setting up new factories on the continent and hiring more Africans. The companies efforts will test whether the masters of low-cost manufacturing can be as productive in Africa as they are in China. __WSJ
An even more interesting recent trend in Afro-Chinese interchange is the number of new ethnic Chinese migrants coming to Africa to build their fortunes, and perhaps put down long-term roots.
This is the beginning of a historically important phenomenon: The creation of a massive diaspora of a trading and investment class of people of Chinese extraction. If you think about the economic history of the world in the last 500 years, big trading and investment diasporas — wherever they may be from — tend to have a huge impact on the subsequent political-socioeconomic [climate] of their destination countries.
Big projects completed by big, government-owned companies dominate the headlines about the advancing Chinese agenda in Africa. But history teaches us that very often reality is more meaningfully shaped by the deeds of countless smaller actors, most of them for all intents and purposes anonymous.
… Chinese told me they did not fully realize how oppressive things were at home until after they had left. Living in Africa, they said, it felt as if a lid had been removed from a giant pressure cooker. Now, they could breathe. __ China Taking Over Africa
New Chinese ventures into Africa do not always work out to everyone’s satisfaction:
In Ghana, an estimated 50,000 new migrants, most of whom are said to have hailed from a single county in southern China, showed up recently to conduct environmentally devastating gold mining. This set off a popular outcry that forced the Ghanaian government to respond, resulting in arrests of miners, many of whom are being expelled to China.
… the problem [with the big Chinese infrastructure projects] is relying on shady arrangements made at the very top of the political system, often in the president’s office itself. Contracts are greased with monetary bribes and other enticements like expense-paid shopping trips to China and scholarships there for elite children. Adding to the opacity, China typically favors its state-owned companies for African projects and bypasses open, competitive bidding procedures. __ New York Times
The world press and certain investment interests want to look at Africa with starry eyes, and use the “threat” of Africa being taken over by Chinese interests to spur western governments into taking a strong interest in the dark continent.
South Africa has long been the strongest national economy in sub Saharan Africa, and has been a strong draw for international investors. So how are things going in Africa’s southernmost nation, under decades of ANC majority rule?
As a socialist, Mr. Zuma has brought South Africa’s once thriving economy to a halt. The value of the currency, the rand, is plummeting. Gross domestic product is growing at less than 2 percent a year and real unemployment is an astonishing 36 percent. A study by Transparency International ranks South Africa at No. 72 out of 175 countries in corruption, a drop of 17 spots since Mr. Zuma became president.
… The presidency has been good to Mr. Zuma. South Africa contributed to a $25 million palace built on his property, and members of his family and close friends have landed plummy jobs. Mr. Zuma faces more than 700 charges of corruption, and the public is paying for his lawyers. __ South Africa’s Socialist ANC Government Wins Again
Amazingly, South Africa’s lagging economy is dragging down the average economic growth of sub Saharan African nations as a whole.
South Africa’s economy—hit by strikes and affected by the slowdown in developed economies—is a drag on sub-Saharan African growth, the report said. The concern echoed the International Monetary Fund’s findings presented in April. Sub-Saharan African economies will grow by 5.8% this year and by 5.9% next year, but the rate is a full percentage point higher if South Africa is excluded from the calculation. __ WSJ
And here is where reality shows its unwelcome face in the middle of all of this happy-happy talk about Africa’s sunny future. High numbers of young, healthy cheap workers can seem a godsend to labour-hungry international manufacturing interests. But African workers are only half as productive as Chinese workers, if that. “The World Bank study estimated that a Chinese worker making shirts, for example, could produce about twice as many per shift as an Ethiopian worker.” (Source) The reality is probably worse than that, the further south one goes to recruit workers.
A quick look at the IQ map at the top of this posting illustrates one reason that Africa remains the poorest among the continents — despite being amply blessed by a wide range of resources. If the human substrate of a region is overwhelmingly incapable of learning to run a sophisticated technological infrastructure, no amount of investment can be justified over the long term.
Study the graph below and consider the occupations that can be staffed by populations with mean IQs near 70, with a standard deviation of 15. Such populations cannot take care of themselves without massive outside help, much less drive global development and prosperity.
Urbanisation is not a positive asset if all you are growing is more and more massive slums, of ever increasing factionality and violence.
The violent crime rates seen across sub Saharan Africa will continue to spill over into all other parts of the world that are populated by an appreciable number of persons of African descent. And here we begin to see one of modern Africa’s most salient and enduring exports.
Kidnapping Threat Worldwide 2014
The provision of bodyguards and personal security across Africa is a booming business. Doing business in Africa can be risky, both physically and financially.
A. macro risks
expropriation of corporate assets without prompt adequate compensation
barriers to repatriation of profit
confiscation of properties
loss of technology and other intellectual property
campaign against foreign products
mandatory labour legislations
terrorist attacks, kidnappings…
Modern China desperately needs lebensraum, as does modern India. Africa could benefit from the import of large numbers of skilled entrepreneurs and technically savvy Chinese and Indians at this time, for many reasons. But what does Africa do with its market dominant minorities who begin to show a bit too much wealth and achievement?
Consider Idi Amin’s Uganda. Or Robert Mugabe’s Zimbabwe. Finally, look at the declining fortunes of the ANC’s South Africa. Demographics have consequences. Those consequences are not always politically correct, or investment positive.
There are many opportunities in the world at large, even in a time of widescale western green corruption. Always consider a region’s demographics as one of the important factors, before committing too much too far into the future.
Update: Another attempt to portray Africa as a land of hope and opportunity. Notice that in the graph of Africa’s per capita food consumption, several countries actually decline in kcal / day.
Attempts to compare per capita parameters such as years of education, literacy, daily food supply, etc. are fraught with hazards. Starting and stopping dates can be cherry-picked. “Literacy” is not defined. Test scores and IQ scores are not provided nor compared.
Average statistical values often neglect the true situations of the masses, when skewed by relatively small numbers of very high values (within the elite etc.).
One gets a truer picture of the present when one looks at the number of people living on $2 or less per day or less. A truer picture of the future combines median IQ with fertility rates.
Such “pie in the sky” and “castles in the air” viewpoints of Africa leave out far more relevant data than they include. Forcing such pseudo journalists to actually live in Africa for a few years would do far more to temper their enthusiasm than any number of link lists from which they might draw.