The 48 countries of sub-Saharan Africa, by several measures, are enjoying a period of unparalleled economic success. A number of factors are going for the region and both the United States and Europe are now taking Africa more seriously, writes Denis Worrall…

TIME magazine recently devoted its annual special issue (23 March 2009) to the theme '10 ideas changing the world right now'. One of these 10 ideas is 'Africa: a business destination'. As TIME itself acknowledges, the perception of Africa for so long has been that 'Africa is hopeless, a place of war and famine seemingly populated almost entirely by tyrants and children with flies in their eyes.' TIME is right. There are numerous groundswell changes taking place within Africa and changing the economic and investment landscape.

Despite a litany of problems, the 48 countries of sub-Saharan Africa, by several measures, are enjoying a period of unparalleled economic success. And despite the turmoil in the world’s financial markets, international investors still think they can make money there. The following are some of the groundswells that explain TIME’s changed view of Africa:

Economies are growing

Socially, there is much greater activism in Africa and respect for human rights; there is a greater trend toward holding politicians to account; and generally greater civil awareness. Politically, there is a perceptible movement to democracy, reflected in two-term presidencies; greater recognition of the rule of law; the notion of a 'brotherhood of liberation leaders' is waning; and tolerance for despots and maladministration is weakening. More effective communications — notably the cell phone — is a major factor. Changes are no less evident as far as African economies go. Economies are growing through the re-establishment of commercial agriculture, mining and manufacturing.

As a result there is an improved economic performance, reflected in rising growth; greater control of inflation; and improved sustainability. Just to illustrate the point, in 1990 to 1994 annual gross domestic product (GDP) growth was a weak 0.9 percent. Since then it has averaged closer to five percent and before the global financial meltdown the International Monetary Fund (IMF) was predicting GDP growth in excess of 6.6 percent. And talking about the current financial crisis, The Economist makes the ironic point that there is a reasonable chance that 'Africa may survive the crisis less bruised and battered than some other parts of the world.' African banks have almost no exposure to the sub-prime market causing such havoc elsewhere in the world. In fact, Benedicte Christensen of the IMF confidently says 'there is no systemic risk that we can see in any African country in terms of banking'.

Other trends in African financial services are the movement to greater choice. Thus more stock exchanges are being established. In fact, perhaps the strongest evidence of Africa’s intention to be a full participant in the financial structure of the emergent global economy is the wave of stock markets set up across the continent over the past two decades. At the beginning of 1983 there were only a handful such as the Nigerian stock exchange, the Nairobi stock exchange and South Africa’s Johannesburg stock exchange. To date Africa boasts some 20 stock exchanges and — because of fast-growing economies — strong equity price gains. Of course, most African stock markets don’t rate internationally, but to quote Teresa Clarke Ellis of Goldman Sachs: "Over the last few years we’ve seen substantial returns outpacing those in developed markets by a large measure."

Other positive trends in Africa

Other positive trends in Africa are improved corporate governance; greater exposure to rating agencies; and increased political and economic integration — so encouraging intra-African trade and joint-venture projects. An illustration of this integration process is the decision in October 2008 of three African trading blocs to create a free-trade zone in effect spanning 26 countries, and with it the establishment of joint infrastructure and energy projects. The three blocs are the Common Market for Eastern and Southern Africa (COMESA), the East African Community (ECA) and the Southern African Development Community (SADC).

While African countries will certainly be affected by things like the drop in commodity prices and a falloff in development aid, foreign interest will continue to stay involved notwithstanding the financial crisis.

China and the Gulf states have been fascinated for some time by Africa and there is no reason why this should not continue. India and Malaysia have been investing in Africa, so much so that it has encouraged the Americans to take a greater interest. The United States wants to get as much as a quarter of its oil imports from Africa within a decade so as to lessen its dependence on the Middle East. The Americans are active in Angola, which now produces more oil than Nigeria. In fact, as a result of foreign interest and the other factors listed (greater sophistication in the financial markets and the expansion of economies on the supply side), the IMF says that a select group of countries — Botswana, Ghana, Kenya, Mozambique, Nigeria, Tanzania, Uganda and Zambia — are now stable enough to rank as emerging markets.

South Africa’s contribution to the continent cannot be underrated

South Africa, of course, deserves special mention. Although always recognised as a major country in Africa from an economic point of view, since the ending of apartheid, the ending of sanctions and the relaxation of foreign exchange controls — particularly in relation to the African continent — South Africa’s business relations with other African countries have expanded dramatically. Aside from the more obvious reasons for this, a less obvious explanation is that South Africa is by far the most sectorially developed country in Africa with the result that its involvement in Africa is extremely diverse. From agriculture, auditing and banking through to retail, transport, project management, engineering and mining advice and equipment, South Africa’s contribution to the continent cannot be underrated.

The picture Africa presents is therefore a generally positive one. Obviously, there are problems. Notwithstanding the inclusive government in Zimbabwe, social and economic conditions in that country are dire and it doesn’t look as though the world — and Western countries in particular — have the will to assist that country from their own diminished funds. Darfur is a festering sore which aside from the human rights abuses that occur there, on the bigger scale of things introduces a tension between Arabs and Africans. Even Kenya, following its violence-scarred election and compromise government arrangement, looks unsteady. And yet, there is a sense of potential: from doom and gloom there is an increasing sense of the sky being the limit.

For example, Nigeria bears comparison with Brazil in agricultural production, energy and commodities; and China and India’s involvement in sub-Saharan Africa has contributed to changed perceptions of Africa — one consequence of which is that not just the US, but Europe now takes Africa more seriously.

Those of us who care about Africa, and who appreciate the positives, have a major role to play in promoting understanding of what is happening in Africa and how Africa is changing — so also promoting trade, tourism and investment.

Denis Worrall is chairperson of Omega Investment Research, a South African-based investment advisory and strategic marketing consultancy. He is a graduate of the University of Cape Town (MA), University of South Africa (LLB) and Cornell University (PhD) where he was a Fulbright Scholar. He started his career as an academic lecturing at universities in the US, Nigeria and South Africa. His last post was as research professor at Rhodes University. He practised as an advocate for seven years in Cape Town, before going into public life. He has been a member of parliament, chairperson of the constitutional committee of the Presidents’ Council, South African ambassador to Australia and the Court of St James (London).

Published courtesy of Blue Chip magazine

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