Is Africa’s Growth A Success Story Or Just Another Commodities Boom?
Africa has seen a decade of high economic growth with more people entering the middle class than ever. But is this growth sustainable and will it lead to improved living standards on the continent in coming years?
This will not be the first time the continent experiences such burst in economic growth, but it is the first time such growth is backed by non-commodity sectors.
A New York Times report said that the burst in growth across sub-Saharan Africa is being fueled by growing consumer demand, driving hopes that Africa will emerge as a success story in the coming years comparable to the rise of the East Asian Tigers in the second half of the 20th century.
The continents fast growing shoppers and workers have even attracted interest from foreign investors who are looking to catch the retail boom wave across the continent.
The African Development Bank projected in its latest annual report in May that foreign investment in Africa would reach a record $80 billion this year, with a larger share of the money going to manufacturing and not just the strip-mining of resources.
“The development is real, and on the back of that, there’s a lot of commercial opportunity that’s emerging,” Simon Freemantle, senior political economist at Standard Bank, told the New York Times.
But a rapidly growing population has seen to it that the inequality gap between the rich and the poor remains, with millions still living in poverty and constant conflict like the violence in Central African Republic, South Sudan and other parts continue to block the real growth in Africa.
Amidst the chaos
Despite all this chaos there has been an increase in sub-Saharan countries that have sought to tap the international bond market for development funding, the latest being the Ivory Coast $750 million dollar bond and Kenya’s $2 billion Eurobond that were heavily oversubscribed.
In South Africa, the broader economy has been sluggish, but the black middle class now spends more money than the white middle class. This country’s long-neglected black consumers spent their money on the far edges of the economy, buying necessities like soap, salt and milk at informal convenience stores called spaza shops for decades during the hard years of apartheid.
While in the United States the mention of middle class conjures the image of a suburban house with a white picket fence and a car in the garage, in Africa The African Development Bank, defines someone as middle class as long as they earns $2 a day or more.
“The future is about that lower middle class that’s expanding quickly,” Staffan Canback, managing director of the consultancy Canback & Company, told the New York Times. He was talking about the people with enough money left over for small packets of detergent or who can save money for name-brand shoes.
“You’re starting to see a middle class even in a place like Angola,” Canback said. “There’s a long way to go, but I think it’s incorrect to say that it’s only a few families that make all the money and no one else makes money. That’s definitely not true.”