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African Sunrise

March 22, 2016

With dramatic population growth forecast and vast untapped economic and agricultural potential, can Africa finally capitalize on its assets in the 21st century?

Cast aside any preconceived notions you may have about Africa. Cast aside the flawed myth believed by some that the African continent remains a vast and homogenous land still struggling to escape its long history of Colonialism and exploitation, war and poverty. Although certain African countries continue to face considerable challenges, modern Africa, with enviable growth this last decade, has finally begun laying many troubled ghosts of the past to rest.

With three mobile phones for every four humans (the same ratio as in India) and an increasingly urbanized and technologically savvy, though still economically fragile middle class, a recent forecast by the World Bank suggests that more than half of global population growth in the next 35 years will occur in Africa.

With its population likely to double to 2.4bn by 2050, the surge in growth is considered a boon for the continent that is already experiencing what’s called the ‘demographic dividend’ - a bulge of youngsters ready to be the next workforce after the recent peak rates in China and India.

Improved governance and macroeconomic management have been hailed as critical factors behind the continent’s continued development across the last decade. The main explanations for the solid economic growth: domestic policy reforms, the global commodity boom, and the demand for Africa’s primary products by the fast growing developing economies in Asia. In 2014, for example, China was Africa’s largest bilateral trading partner with USD 200bn worth of trade reported the Financial Times.

CONTINENTAL KICK-START

Therefore, while recent media headlines proclaiming ‘Africa Rising’ and the ‘African Century,’ have some merit, numerous and serious caveats remain.

Not least, it has been estimated by Forbes that Africa still suffers from a USD 900bn infrastructure deficit in areas including potable water, reliable communication, driveable roads and sufficient energy. The dramatic slowdown in China’s economy in 2015 and resulting global volatility has also put a serious damper on Africa’s growth. Critical factors behind the economic slump include China’s sudden mothballing of investments in the region, the global collapse in commodity prices, and many currencies in freefall against the strong US dollar. Many African nations also now have fiscal deficits and it is likely to be very difficult to borrow their way out of the problem. These factors have combined to create the most serious economic challenges seen in recent years.

In preparation for this next-gen workforce ‘dividend’ coming of age, the question is how then to kick-start an entire continent’s economy – an economy often caught in the tangle of red tape, crying out for further root-and-branch-reform and in many countries, the simple rule of law. Take three of the biggest factors that may currently be considered lacking across the region; traditional infrastructure, education and the manufacturing industry. How to begin?

Dawie Roodt is a Director and Chief Economist at the Efficient Group, a South Africa based integrated financial services company.

“My emphasis would probably start somewhere else,” states Roodt, “I think that first of all there must be a political will to integrate economically. We need to address how we can do more business with each other. That is a huge issue in Africa, we do business with everybody else but not with each other, but that’s slowly being addressed.”

DEMANDING AND SUPPLYING

According to the International Monetary Fund, in terms of global trade in services, Africa remains a marginal player and presently accounts for just over 2 percent of the world’s total exports and 4 percent of total global services imports. This equates to just 2.5 percent of global GDP, though Africa’s population, at over 1.1 billion, makes up 16 percent of the global total. Europe, by way of comparison, constitutes a quarter of global GDP from a 750m population.

If Africa’s population growth is the future panacea for many of the continent’s current ills, it comes with a myriad of challenges to implement.

Continues Roodt, “In order to really capitalize on your demographic dividend, you need to keep these people busy. What the Chinese did was to put them into manufacturing. But in order to manufacture, you need to have skilled people and that is Africa’s single biggest challenge because we don’t have that.”

Skills-based education is another critical prerequisite then, if the continent is to reap the benefits of its next generation of young people entering the workforce.

Yet, amidst the economic downturn and stubborn pockets of deprivation, certain African countries still have considerable potential to shine in future decades. 

FACTORIES AND FARMS

“Sixty percent of the global undeveloped agricultural potential is in Africa,” says Roodt, “And that’s why I’m very optimistic about countries like Tanzania, for example. Aside from tourism, in terms of corn, it could literally feed the world. Mozambique’s agricultural potential is absolutely amazing, for all its tropical fruits, from mangos and lychees and bananas, it is literally a Banana Republic. Agriculture is one of the industries I’m very positive about.”

Roodt also sees Africa’s most populous country Nigeria as a country with longer-term institutional potential, though oil, their main export product (like in Ghana) has recently plummeted. Likewise, Rwanda, Kenya and particularly Mozambique also rate highly in terms of recent and potentially future economic growth.”

It is clear then, that there are many fundamental challenges to overcome if future Africa is to live up to its recent and arguably overhyped potential. But right now, the potential is palpably tangible.

“I am cautiously optimistic about Africa simply because we have never been where we are now,” opines Roodt.  “Africa can be the real next big economy, it can become the factory of the world, and in fact can become the farm of the world. We can beat the Chinese and the Brazilians all in one if we play our cards right. Even though I’m afraid we’re going to miss our chance, we need to grab this opportunity now.”

It might not be ‘Africa Rising’ then, but Africa is certainly changing.
 

Text: Dan Rider
Illustrations: Anton Yarkin

Konecranes in Africa – 3 questions

Aku Lehtinen, Senior Vice President, Head of Region IMEA (India, Middle-East & Africa) 

Why is Konecranes operating in Africa?

The majority of Konecranes opportunities are related to investments in logistics, mining and oil. International companies are in Africa and a big portion of our business is related to foreign direct investments. It is extremely important to keep high business ethics in all our operations wherever we are, including Africa. With Konecranes products, it is possible to improve productivity, safety and technology in different industries in Africa.

What is the importance of Africa for Konecranes?

The importance of Africa for Konecranes has increased considerably in the last 10 years. The logistics related Ports & Lift Trucks business have been growing significantly and has really been a success story. So while the current weakness of emerging markets are effecting our growth speed to a certain extent, we remain pleased with progress.

What is the future direction for Konecranes in Africa?

We made strategic moves some years ago and started our own operations in South Africa and Morocco, with our partner network now in many other countries throughout Africa. We have placed our own operations only in the most stable countries and work with reliable partners. We are continuously looking for opportunities to further strengthen our partner network to ensure growth. We have been mainly focusing on new equipment, but there are also good opportunities in the Parts and Service business. Our future direction is both clear and positive.