Not hunting in the same pack: Africa's economic Lions

8/6/2019 Not hunting in the same pack: Africa's economic Lions

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Not hunting in

the same pack,

the performance

of Africas

economic lions.Commentary on McKinsey

Group report, Lions on the

Move: The progress &

potential of African economies

[June 2010].Tinacho Gerald 21 February, 2011

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Commentary on McKinsey Group International report:Lions on the move: The progress

and potential of African economies(June 2010).

A recent report by the McKinsey group focusing on the real and potential growth inprosperity and economic progress on the African continent is a cause for celebration.

There was real growth on the continent in the first decade of the 21st

century, after 40years of general economic stagnation collectively. It is however important to immediatelypoint out that Africa cannot be fairly assessed collectively. There are varying levels ofpeace, stability, hope, economic growth, social inclusion and political freedom.

The progress and consistent growth of Botswana is offset by the regression and decline ofa once thriving Zimbabwean economy next door. Rwanda has emerged as one of Africas

great growth stories in a country with very little in the way of natural resources while theneighbouring DRC has been blighted by violence and a general lack of access to healthfacilities made worse by massive displacement caused by rebel activity in the east side of

the country. Relatively wealthy Egypt and Tunisia have seen recent revolts against therule of dictators while the rest of the continents dictators watch with a level of uneasethat has seen crackdowns around the continent, particularly in Algeria and Libya.

The continent continues to be dependent on resource extraction, with oil producers suchas Nigeria, Angola and Algeria acquiring over 80% of export earnings from black goldoil; while other countries bank on mineral wealth(e.g. Zambia) and the sale of cash crops(cocoa in the Ivory coast).The McKinsey report also points out diversified Africaneconomies which draw from various forms of economic activity for growth. Theseinclude South Africa, Morocco, Egypt and Tunisiawhere manufacturing and servicesaccount for more than 70% of official countrywide income.

The report focuses on Africas biggest 31 economies that account for 97% of AfricanGDP in 2008. These countries have had a growth rate of 7% or more (between 2000 and2008) and their 2008 GDP was $10billion or more. The report states several reasons fortheir impressive growth in the beginning of the 21st century:

-a resource and commodities boom that has resulted in increased earnings all

around Africa where these remains a main source of income; government policy

promoting investment; the end of political conflicts, and better business

environments around the continent.

While it is very heartening to see the growth and progress across the continent, ignoringthe other 22 countries not included in this report is reckless. For them to only contribute3% to the aggregate African GDP is tragic. It is also worth pointing out that inequality isrife around the continent and a high GDP per capita does not signal prosperity for all.
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South Africa remains a country with massive differences in incomes, and the recentrevolutions in Egypt and Tunisia had an economic undercurrent in them with youthsangry at the lack of job prospects in relatively rich African nations. If Africas lions are

to truly roar there will need to be better leadership and distribution of the undeniableriches the continent possess. The Niger Delta is still rife with violence as locals suffer

from environmental degradation caused by irresponsible drilling in addition to beingcaught in the cross fire of battles between government forces and so called rebels.

The report points out the fact that intra-Africa trade is minimal, at about 15% of totaltrade. This is a major issue considering the potential gains better regional integrationcould result in. Dependence on the global market for commodities and other goods leavesthe continent at the mercy of economic conditions in Europe, China and the United States

a situation that could possibly be more stable if Africans can consistently trade amongthemselves. Obstacles to trade stated in the report include high tariffs, product standardsand trading rules in addition to the simple fact that most African nations export

commodities/raw materials and import manufactured goods. Poor infrastructure andbureaucracy make matters worse although all hope is not lost. The report discusses theimportant steps being taken in the East African Community (EAC) to integrate, with theelimination of tariffs and opening up of labor markets. Other regional communities likeSADC and ECOWAS are making progress in this respect although they have not reachedthe level of integration of the EAC.

A pan-African economic ideal is possible and may ultimately be the best way for trueprogress. The example of the EAC is the best move towards the African EconomicCommunity. There is some way to go, but the possibilities of a union do exist. The AEC

plan envisions integration within sub-regions such as the EAC and SADC first with theeventual formation of the AEC.

The report talks about the rise of a consumer class on the continent being a key engine ofgrowth. A group of people whos rising economic status and subsequent disposableincome is set to fuel growth in services and other parts of the economy in differentcountries. There is a third way potentially: Formalizing the informal economy.

Finding a way to formalize the informal sector may be the key change that will bring somany Africans out of the clutches of poverty. The informal sector in different Africancountries has come about out of necessity as tens of millions have found themselves

excluded from the income generating sections of the formal economy. Africans havecreated their own means of productivity, adapting to the needs of customers who tend tobe at the same low level of income. The informal markets have become essential in justabout every country, as people employ themselves, feed their families and provideservices.


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Governments could perhaps introduce a licensing system providing informal traders anopportunity to formalize their operations. Schemes to allow traders to access capital viamicro-finance and investor networks could lead to genuine economic growth. As thesmall traders expand their operations they could then be taxed if they reach a certainincome level, providing governments with a new source of income. Such a system would

conceivably create more opportunities to earn an income and governments would be ableto collect more tax revenues.

The McKinsey report paints a positive picture on the future of the continent. Projectionspredict that the African middle class will swell and their increased discretionary incomewill see more economic activity and prosperity on the continent. The report is written fora western audience and the focus on GDP and economic numbers is clear, like mostliterature and narrative concerning the continent. There was no mention of health andimproved social conditions for Africans (middle class or not), a fact that belies anongoing attitude of seeing the continent as a place for European and western advances

and resource extraction.

Africas future growth is unimportant if the well being of all Africans is ignored. Onehopes that the next chapter in Africas reality is a better one with Africans at the forefrontof the transformation.

Tinacho Chitongo is a Harare based freelance writer creating interesting content related to

southern African cross border collaboration. You can reach him [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]

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Not hunting in the same pack: Africa's economic Lions