This month I talked about Africa at Chicago’s Booth School of
Business, a GBSN member. So I thought I would put on my development economist
hat and take a fresh look at the continent – meaning Sub-Saharan Africa. Nothing about management education this time
Things have definitely improved, especially since world commodity
prices started soaring around 1995.
There is so much exuberance about Africa that a recent issue of "This is
Africa” is entitled "Over-hyped? Competing narratives on the African growth
story”. I thought it might be interesting to compile two lists: what I see as positive
factors and the challenges.
Let’s start with the list of challenges:
In spite of its
enormous size and population, Africa is small economically, accounting for less
than 2 percent of the world economy. Three economies – South Africa,
Nigeria and Kenya – produce more than half of Africa’s GDP. On average, the other countries have small
markets – the size of Albania or Cambodia or about $ 10 billion. As there is little inter-African trade,
incumbent firms tend to dominate each of these small markets.
increases costs. Shipping a car from China to Tanzania costs $4,000, but
getting it from there to nearby Uganda costs another $ 5,000. Forty percent of produce trucked into Lagos
spoils in transport. Power shortages are daily occurrences. For businesses,
energy adds up to 10 percent of total costs, compared to 3 percent in
China. Labor costs are high by
international standards in relation to productivity. Partly because of this,
Africa has the world’s lowest share of manufacturing, and it continues to
While some public
institutions have improved, corruption is pervasive, as evidenced by recent
Transparency International and African Development Bank surveys. This is a drag
on property rights and law enforcement. Public education systems yield very
poor educational outcomes.
Last, but not least, Africa’s
economies are more than ever vulnerable to drops in commodity prices (i.e.,
the economic health of OECD and BRIC countries).
Fortunately, there are lots of positive developments as
accelerated from only 2 percent a year in the 1980s (when population was
growing by 3 percent a year) to 5 percent in this century. At this rate
Africa’s market will double in about 12 years. Macro policies have improved greatly, and
inflation is no longer a major concern. The volume of oil and other mineral
exports keeps growing.
inflows, including public and private investment from China, now exceed foreign
aid, putting Africa on the desirable path of "development without aid
dependence”. Private capital is flowing
into a whole range of sectors: telecommunications, banking, tourism,
construction, health and education facilities and, importantly, because they
generate a lot of employment, agri-business and retail shops.
Perhaps more than any
other factor, the spread of mobile phones has transformed Africa, bringing
several hundred million persons out of isolation. As internet connectivity
improves, the next wave of innovation is underway with the increasing spread of
smart phones. This revolution has begun to transform retail banking, health and
agricultural services. Education will be
next in line – including business and entrepreneurship education.
To end on a cheerful note, the University of Michigan’s
World Value Surveys asked persons in some 80 countries: "Taking all things
together, would you say you are: 1.Very happy, 2. Rather happy, 3.
Not very happy, or 4. Not at all happy?" Nigeria topped the list! On the broader ranking of "subjective
well-being”, Nigeria ranked 19th, wedged between Sweden and Norway.
Guy Pfeffermann is the CEO and founder of the Global Business School Network. He served as a development economist for the World Bank Group for 40 years, including 16 years as the chief economist of the International Finance Corporation.