African countries have been urged to prioritise sustainable investment in people in order to propel faster development over the next decade.
Martyn Davies, CEO of Frontier Advisory and a Young Global Leader of the World Economic Forum, reckons that for African nations to graduate from “emerging economy” status into the ranks of the First World, diversification of the economy is critical.
This can only be achieved through a sustained and sizeable investment in people, thus the need to generate, retain and create opportunities for talent in domestic economies.
According to Davis, Africa’s economies are growing strongly propelled over the past decade by high oil and commodity prices, rising consumer spending and the potential for industrialisation.
But while companies have awoken to the “Africa opportunity”, Africa’s new growth trajectory must be sustainable, Asia-style.
“The rapid ascent of Asia’s Tiger economies in the past three decades, particularly China, and the creation of wealth in their societies reinforce the belief that “developing economy” is only a temporary tag on the pathway to a First World future. So the question becomes, can Africa’s GDP growth translate into qualitative development across the continent?” notes Davis.
According to Davis, three factors will play a critical role in the sustainable development of Africa. These are the continent’s extractive industries, rising consumerism and ability to industrialise.
Looking across Africa, countries with the biggest natural resources endowments are anything but shining examples of inclusive growth.
Wealth is unable to trickle down into society from “narrow” extractive industries, especially in the face of corrupt and bureaucratic governments.
Even the internal security threats that afflict many African are testament to their inability to bring about inclusive growth for their citizens.
Ultimately, governance will determine whether the resource rents are reinvested into ensuring that African economies are sustainable.
The second lens is that of the African consumer market. Today consumer companies are expanding their footprint across the continent to serve a previously untapped consumer market.
This trend is expected to continue driven by demographics as companies seek to capture clusters of consumers and consolidating this business through efficient supply chain management.
The third factor that will determine where African countries stand a decade from now is how far they are able to climb up the industrialisation ladder.
To realise growth, sub- Saharan states will need to forge proactive business-friendly growth models at the policy level rather than aid-supported reactive economies driven by commodity prices that result in nothing more than dependency.
“There are huge opportunities for African countries, not least from the fact that the value chain of production in Asia is shifting away from China,” states Davis.
The rising cost pressures on China’s manufacturing sector will cause them to relocate to lower-cost foreign economies. This creates an opportunity for forward-looking African countries to emerge as “new Vietnams ” — lower-cost destinations for manufacturing.
If this opportunity is seized by reformist African states, they could well be on the cusp of a 19th-centurystyle industrial revolution.