The Future Brightens for the Dark Continent

When you hear the word "Africa," what do you think of?  Poverty?  Squalor?  Civil war?

Consider this:  Africa has numerous cities with populations of a million or more, which is as many as all of Europe.  In fact, the African continent is almost as urban as China. 

The combined gross domestic product of African nations grew by almost five percent per year between 2000 and 2008, according to a new report in the McKinsey Quarterly.¹  That's double the growth that Africa experienced in the two decades before that period.

Money is flowing into Africa for new construction, banking, telecommunications, and retail.  Despite various African nations that are failing, the combined GDP of the continent is still $1.6 trillion, on par with Brazil and Russia.  In terms of economic growth, Africa is near the top of the list.

Some of this is due to rising prices for resources such as oil, minerals, and other commodities.  But about two-thirds of the growth is coming from real structural changes that have allowed growth in transportation, telecom, manufacturing, retail, and wholesale.  This means that even nations that do not boast rich resources are achieving excellent growth. 

For example, many African governments have taken action to stop warring groups from killing one another.  This has created the necessary political climate to encourage investment. 

African countries have also taken steps to curb inflation, which had run up to 22 percent in the 1990s.  After 2000, it was down to around eight percent.  Governments have reduced debt and deficits, and put state-owned operations into private hands.  Reducing corporate taxes, improving regulations, establishing proper legal systems, and building out infrastructure have all contributed to their efforts and subsequent growth.

In addition to all of these structural changes, Africa continues to benefit from its rich natural resources as global demand rises.  Africa has plenty of oil, natural gas, arable land, and minerals.  Fully 10 percent of all the known oil reserves in the world are in Africa.  It also has between 80 and 90 percent of the chromium and platinum, and 40 percent of the gold — and there is untold wealth that remains undiscovered as well. 

An example of how this benefits African economies can be seen in a deal made between China and the Democratic Republic of Congo.  China will get access to 10 million tons of copper and two million tons of cobalt, in exchange for building roads, rail lines, hospitals, schools, and mine improvements worth $6 billion.This has helped to increase the tot... To read the full article, you must be a Trends Magazine Subscriber. To learn more, click here