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Progress Watch

As Europe peers into economic chasm, Africa's economy is rising

Reports by the African Development Bank, World Bank, and McKinsey show how Africa continues to offer a bright spot in the global economy.

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McKinsey, which interviewed some 15,000 consumers in 10 different African countries, found Africans to have the kind of spending habits that attract big companies. According to the report, most African households spent 30 percent of their money on groceries, 10 percent on clothing, 6 percent on telecommunications, an amount that could total $185 billion by 2020.

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Now, that is still far behind the spending of Indian consumers, who spent $991 billion in 2010, and are expected to spend $3.6 trillion by 2020. But it’s not nothing, either. And unlike Europe, the Americas, and the non-Chinese parts of East Asia, Africa is actually growing.

Africa, it must be noted, is not a country, and its growth is not spread out uniformly like tulips in a Dutch field. There are laggards like Central African Republic and Chad. There are conflict-torn countries like Somalia, anarchistic messes like the Democratic Republic of Congo, a scattering of dictatorships, and odd little kingdoms like Swaziland where the leaders treat the public treasury like a personal piggy bank.

(Note: There are 325 shopping days until Swazi King Mswati III’s next birthday. Last year, he got a jet. Sadly, his people, many of whom live below the poverty line, barely scrape by on less than $1 a day.)

So yes, Africa has problems. But it’s easier to deal with problems if the money is flowing in, and that is certainly the case in Africa. In fact, the influx of cash and investment is so strong that the African Development Bank warned this week against “excessive exuberance,” which sounds close to Alan Greenspan’s warnings against “irrational exuberance,” in December 1996.

Chronic youth joblessness at home, along with the uncertainty over Europe’s ability to control public debt, could still drag down Africa’s economic growth, since Europeans buy much of the food and other commodities produced by African companies.

"That will have implications on the growth of the continent," Donald Kaberuka, the president of the African Development Bank, told reporters at the launch of the bank’s economic outlook report yesterday in Tunis, Tunisia.

The key to success with money, according to the African Development Bank, is to act as if you don’t have it.

"While keeping an eye on new economic storm clouds in Europe, Africa must keep its focus on reforms that encourage growth and ease social tensions that set off the Arab revolutions and caused North Africa's GDP growth to decline by 3.6 percentage points to near stagnation in 2011," the bank said in its report.


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